Cue Political Headlines; Bond Markets Back Near Unchanged Levels
While earlier weakness did result in a few negative reprices, current risk levels are greatly dimished--at least for right now. 10yr yields bounced twice just over 2.64 and have since moved down to 2.62.
MBS have been choppy and lacking in liquidity (meaning buyers and sellers having a hard time finding each other at their preferred prices), but gradually ground their way back into positive territory.
Bond markets may have been more prepared to move into weaker territory today if a government-shutdown resolution looked more realistic than it currently does, but just when you thought the political posturing surely couldn't get more outrageous than last time, the headlines have begun flying.
On one side of the current debate, we have the White House saying that a unilateral decision to raise the debt ceiling wouldn't fly with global markets. On the other side, we have House Republicans calling for Obama and Administration officials to sign up for Obamacare.
Whether or not markets are interpreting this tomfoolery as suggestive of an impasse tonight, or whether we're simply seeing month/quarter-end tradeflows bring money into bond markets isn't exactly clear. Either way, we're back into positive territory, and forced to keep an eye on headlines just the same.
Keep in mind that 3pm is a volatile time on month/quarter-end, as the post 3pm time is technically a new quarter as far as Treasuries are concerned.