Stock Lever Leads Slight Pull-Back Around Auction
It's not a perfect one to one relationship, but the major peaks and troughs in stock prices and bond yields have occurred at exactly the same times yesterday and today. Heading into the afternoon, Treasuries and MBS have given up just a bit of ground, but are actually resisting a relatively more pronounced bounce back in equities. S&P's are roughly 8 points off their lows and 10yr yields have moved up about 1.5 bps. Fannie 3.0s MBS are down 2-3 ticks from noon highs, but aren't in any sort of aggressive selling pattern (net unchanged on the day!).
The 5yr Treasury auction was of relatively little consequence with utterly average results all the way across the page. It was more of an acquiescence to yesterday's move and current uncertainty.
From here on out, the "risk-on/risk-off" trade looks like it's continuing with the most recent moves in equities and bond markets continuing to mirror and match for the most part. If anything, bond markets may be showing a bit of incremental determination over the past 10-15 minutes to hold ground at support levels. This could soon lead MBS into the green and increase positive reprice possibilities. A few lenders have repriced.
1.874 is relevant overhead technical support in 10yr yields. Below there and we're feeling pretty good. Rising above, we're risking a bit of follow-through weakness in MBS. The days previous highs at 103-21 would be resistance for now, with a break above ramping up positive reprice potential. Near term support is right around 103-17. All told, things continue to be surprisingly calm and narrow given the ferocity of yesterday's moves.