Bond Markets Slightly Weaker Overnight and Into Domestic Session
After month/quarter-end yesterday, bond markets have generally been under pressure--first moving higher in yield overnight, and weakening further in the first hour this morning. Treasuries underperformed German Bunds in the European session as well--something that speaks to organic, Treasury-specific weakness.
Frustratingly, it's not something that lines up with any events or data releases. This "weakness for weakness's sake" speaks to underlying tradeflows and trading position considerations heading into the new month and this Friday's NFP.
The day's only significant economic data is out at 10am with ISM Manufacturing. If it's strong enough, it could have a compounding effect with the existing tradeflow weakness and make for some unpleasantly brisk snowball selling. It would remain to be seen if a weaker-than-expected reading would do as much good considering that wasn't really the case with yesterday's Chicago PMI.
10's are up 2.5 bps to 2.75 at the moment and Fannie 4.0s are down 5 ticks at 103-27. Neither have moved through their weakest levels from yesterday, so we got that going for us for now.