Bond markets definitely found their footing after the...

To refer to the 10yr auction that just happened as "weak" is perhaps overdoing it. If we simply look at the auction statistics vs those of other auctions, it was on the weak side. Bid-to-cover at 2.83 was noticeably lower than the average for 10yr Re-Openings and the stopping yield was about 1bp higher than expected (based on the 1pm "when-issued" yield). But if the auction is viewed in the context of the day's trading direction, we see a fairly healthy rally in the hour leading up to the auction.

In other words, there was a good amount of last-minute horse-trading between noon and 1pm. There was a growing amount of buzz for a strong auction and markets began betting on that eventuality, building a mini-snowball that carried yields 3bps lower in that hour. Had the auction gone off prior to said snowball, we'd be looking at much stronger results.

That's why we saw the initial pullback in yields and MBS prices (the fact that the auction didn't quite live up to the last-minute horse-trading), and the aforementioned "context" is why yields have found what looks to be a firm ceiling before breaking back above the pre-rally highs. Markets are essentially seeking out the levels that likely would have prevailed in the absence of the rally.

Post rally, that = selling pressure, but in context , just a continuation of the same old trend of sideways-to-slightly-better levels that began after Friday's NFP sell-off. Just another brick, and not a lot of suggestion as to the rest of today's trading. Bottom line, MBS are hanging tough, still at or near unchanged levels, currently up 2 ticks at 104-14 after being as low as 104-11 after the auction.

Once again, we're coming off an overnight session that saw limited volume and volatility compared to what one might hope for in the wake of last week's big shake-up. At least the small amount of movement seen, has generally been in a friendly direction.

Overnight 10yr yields made it only as high as 1.89 while equities futures continued to grind against the same highs as yesterday's pre-market session. 10's hit the domestic session essentially unchanged, and for all intents and purposes continue to be unchanged from 5pm levels at 1.867. MBS had been perfectly unchanged until the past few minutes brought Fannie 3.0s down 2 ticks on the morning to 104-11. Even so, this is well within the narrow range set up between yesterday's 10AM highs and afternoon lows (a scant 4 ticks from 104-11 to 104-15).

There are no significant pieces of data out this morning, though a Fed "Twist" buyback will begin at 10:15, finishing at 11:00am. The biggest event of the day for Treasuries will be the 10yr Auction at 1pm. The headline alludes to the possibility that bond markets are rangebound in anticipation of that auction. We'd emphasize "possibility." All we can say about it now is that it's "the next big thing," and while it could be the biggest motivator of the week so far, there's no guarantee it will be.

Bond markets definitely found their footing after the...

To refer to the 10yr auction that just happened as "weak" is perhaps overdoing it. If we simply look at the auction statistics vs those of other auctions, it was on the weak side. Bid-to-cover at 2.83 was noticeably lower than the average for 10yr Re-Openings and the stopping yield was about 1bp higher than expected (based on the 1pm "when-issued" yield). But if the auction is viewed in the context of the day's trading direction, we see a fairly healthy rally in the hour leading up to the auction.

In other words, there was a good amount of last-minute horse-trading between noon and 1pm. There was a growing amount of buzz for a strong auction and markets began betting on that eventuality, building a mini-snowball that carried yields 3bps lower in that hour. Had the auction gone off prior to said snowball, we'd be looking at much stronger results.

That's why we saw the initial pullback in yields and MBS prices (the fact that the auction didn't quite live up to the last-minute horse-trading), and the aforementioned "context" is why yields have found what looks to be a firm ceiling before breaking back above the pre-rally highs. Markets are essentially seeking out the levels that likely would have prevailed in the absence of the rally.

Post rally, that = selling pressure, but in context , just a continuation of the same old trend of sideways-to-slightly-better levels that began after Friday's NFP sell-off. Just another brick, and not a lot of suggestion as to the rest of today's trading. Bottom line, MBS are hanging tough, still at or near unchanged levels, currently up 2 ticks at 104-14 after being as low as 104-11 after the auction.

Once again, we're coming off an overnight session that saw limited volume and volatility compared to what one might hope for in the wake of last week's big shake-up. At least the small amount of movement seen, has generally been in a friendly direction.

Overnight 10yr yields made it only as high as 1.89 while equities futures continued to grind against the same highs as yesterday's pre-market session. 10's hit the domestic session essentially unchanged, and for all intents and purposes continue to be unchanged from 5pm levels at 1.867. MBS had been perfectly unchanged until the past few minutes brought Fannie 3.0s down 2 ticks on the morning to 104-11. Even so, this is well within the narrow range set up between yesterday's 10AM highs and afternoon lows (a scant 4 ticks from 104-11 to 104-15).

There are no significant pieces of data out this morning, though a Fed "Twist" buyback will begin at 10:15, finishing at 11:00am. The biggest event of the day for Treasuries will be the 10yr Auction at 1pm. The headline alludes to the possibility that bond markets are rangebound in anticipation of that auction. We'd emphasize "possibility." All we can say about it now is that it's "the next big thing," and while it could be the biggest motivator of the week so far, there's no guarantee it will be.