Bond Markets Holding Ground After Weakening Slightly Overnight
Treasuries began the overnight session moving slightly higher in yield despite weaker manufacturing data out of China. Even in the European session, domestic bond markets continued going against the grain with 10yr yields rising just slightly during the same time German 10yr bonds fell from 1.65 to 1.62.
The paradoxical departures from overnight events speaks to one of two things. Either we're seeing some accommodation built in to trading levels for this week's upcoming Treasury auctions or we're still coping with negative momentum from last week's forceful shake-up in the Treasury yield curve.
In fact, both factors are probably in play (pre-auction weakness and general momentum), though both are much ado about nothing in the context of March's movements. In fact, in that context, we're still waiting to see what bond markets do following last Wednesday's initial sell-off, because so far, they've simply been perfectly sideways.
Today's iteration of "sideways" sees MBS paying back a bit of Friday's rally, with Fannie 4.0s down 5 ticks so far this morning at 103-22. 10yr yields are currently up just under 2bps at 2.77.
There are no significant events on the calendar today and volume has been average. The only real market movement cues we have are market movements themselves. In that regard, nothing has yet happened to change the 'sideways' vibe, albeit at slightly weaker levels than Friday.