Bond Markets Holding Ground at Slightly Weaker Levels
The overnight session was a distinct 2-parter today in that the Asian hours saw steady, positive movement for Treasuries while the European hours saw Treasuries turn on a dime and move quickly weaker.
While still not 'robust,' European market participation is improving after yesterday's holiday. There were no salient market-movers in play when Europe began trading in earnest, but it is quite clear that Treasuries began losing ground moments after German Bunds (Germany's 10yr). It's almost as if Treasuries were waiting to get their overnight directional cue from Bunds.
When 8am rolled around, 10yr yields were up 2bps at 2.635. They haven't done much since then but just now rose to 2.638. MBS hit the open 6 ticks weaker at 102-05 in Fannie 3.5s, and are 1 ticks higher now.
This morning's weakness risks reinforcing potentially negative technical patterns. The worst of those (from the standpoint of interest rate bulls) would be the confirmation of a reentry into the 2.6-2.8 range that dominated most of 2014.