Bond Markets Slightly Weaker After Calm Overnight Trading
Treasuries had and exceptionally calm overnight session, with 10yr yields trading between 2.532 and 2.500 during both Asian and European market hours. Core EU debt (i.e. the stuff that's most similar to Treasuries) helped maintain the range into 6am, but pushed yields back up heading into the US session.
Treasuries and MBS crossed the starting line almost perfectly unchanged. Since then, they've seen more volatility than momentum in one direction or another. Both are just slightly weaker at the moment with 10yr yields up 1.1bps at 2.5548 and Fannie 3.5s down 1 tick at 102-04.
There are no significant scheduled events on tap today. As we discussed in greater detail yesterday, this week has seen an active corporate debt calendar. This just means that companies are issuing bonds, and to some extent, those bonds add a bit of competition for Treasuries and MBS.
In addition, during the process of pricing and issuing those bonds, corporations frequently use Treasuries to hedge against changes in rates. Ironically, this tends to have noticeable, even if short term effects on the rest of the bond market, causing volatility to trickle down to MBS as it did yesterday.