Surprisingly Decent 30yr Bond Auction; Delayed Gratification for Bond Markets
While it hasn't made for any significant selling pressure in MBS, the 30yr Bond Auction results didn't prompt much additional positivity (not at first anyway). That's counterintuitive consider the bid-to-cover and awarded yield were both better than recent averages, which is even more impressive given the fact that the auction happened at the day's strongest levels after a significant rally (all things being equal, markets tend to favor slight weakness in the bonds that are about to be auctioned, with a slight recovery in the event of an average-or-better result).
The easiest explanation is that today's market movement isn't too concerned with Treasury supply, and is instead driven by big, archetypal trades favoring safety vs risk. This can create a good amount of momentum in multiple asset classes and today is no exception. S&Ps are down 30 points. Euros and Yen have rallied immensely, as have MBS and Treasuries. The end of the week's Treasury supply burden isn't really a cause for celebration when bigger fish are already in the process of being fried.
That said, here at the 15 minute mark, bonds are breaking into stronger territory. It's tough to say whether this has anything to do with the auction. It probably does not, but the auction being over certainly doesn't stand in the way of more tradeflow-based positivity. There are also more QE headlines out from the ECB just now.
MBS are at the day's best levels, up nearly half a point at 104-25 and 10yr yields are down 6.5bps to 2.62.