Bond Markets Stronger Overnight and After Claims Data
Treasury yields fell steadily throughout the overnight session, helped along by weak manufacturing data in China and a strong 10yr auction in the UK. Apart from the overt motivations, volume and tradeflows suggest traders were predisposed to maintain the range anyway.
In other words, yesterday's weakness introduced the risk that bond markets would begin drifting out the wrong end of the mid-January sideways range, and the trading since then is a relatively firm decision to maintain the range.
In fact, as far as Treasuries are concerned (because MBS aren't quite there yet), we're right on the lower yield boundary of that range. The morning commentary discussed a pre-FOMC "lead-off" forming today and although it seemed more at risk of being the weaker variety yesterday, there's no rule against it going the other direction.
The overnight strength was augmented by as-expected Jobless Claims numbers and a surprisingly higher Continued Claims reading. Here are the details:
- Claims 326k vs 326k forecast
- Continued Claims 3.056 mln vs 2.93 mln forecast
- Full Release
10yr yields are currently right at 2.82 and Fannie 4.0 MBS are up 11 ticks at 103-31+