After Losing Ground Overnight, Bond Markets Bounce Back
The overnight session held little of interest for bond markets. Apart from the housekeeping trading in Treasury futures (moving from March to June coupons, aka "calendar roll trading") volume has been light. The trading range was narrow and biased slightly toward weakness, but an incidental and inconsequential move higher in yield is to be expected if the overall consolidative range is to be maintained.
As such, it wasn't too disconcerting to see yields a scant 1-2bps higher overnight. Even then, 10's were holding their ground just under 2.72. Most recently, wires started coming out regarding Russian military tests, and these may be driving a flight-to-safety (buy bonds, sell stocks) bid.
Europe is clearly leading the charge there with German Bunds surging to their best levels since Feb 5th. Treasuries are clearly following. It's not like there's anything more compelling to trade on the home front.
That's resulted in Treasuries now breaking into positive territory. 10's are down half a bp to 2.695. MBS are keeping pace with Fannie 4.0s and 3.5s both up 2/32nds from yesterday, and just now hitting yesterday's highest levels.