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Bond Markets Weaker after Sentiment Data wasn't 'Weak Enough'
Posted to: Micro News
Friday, October 11, 2013 10:19 AM
We'd already made our case for a weaker-than-expected Consumer Sentiment reading. Although that technically happened, it didn't happen enough to satisfy those who were expecting to see a lower headline than 75.2 vs a previous report of 77.5. In other words, the Fiscal drama had traders prepared for a bigger surprise to the downside, and it no looks like some of this morning's positivity in bond markets may have been an attempt to get ahead of that eventuality.
In plainer terms, traders were well within their right to account for the possibility that the data would be even weaker than it was. This likely added to some of the morning's gains in Treasuries/MBS. Then when the data came in fairly close to consensus, the aforementioned defensiveness was free to melt away.
It hasn't been much to write home about as 10yr yields have moved from just under 2.65 to just over 2.66. Fannie 3.5s are off their 101-17 highs, down to 101-14 (still 7 ticks up on the day.
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