Bond Markets Weaker as Month-End Trades are Unwound
9 out of 10 bond traders agree, June is not May (that statistic has a standard error of ±1 trader). Whereas Friday was a day for the month-end trading environment to firmly defend any rise above 2.50 in 10yr yields, Monday couldn't care less.
Any time we see markets decidedly doing "something" for "some finite reason," it's not uncommon for them to do at least a little bit of the "opposite of that something" as soon as the finite reason is out of the picture. Such is the case with a strong showing of month-end buying demand. It often runs the risk of reversing a bit at the start of the next month. The bump toward higher yields right at 3pm on Friday was a clue about this phenomenon, and confirmation is arriving presently.
10yr yields are already up to 2.514 and MBS are down 5 ticks at 102-25. Stronger data in China is also said to have weighed on bond markets overnight, but if it did, it wasn't much. Most of the damage has been done in a slow, systematic process that reeks of a small-scale rebalancing of positions among traders (as opposed to the actual reaction to a discrete event).
As far as discrete events are concerned, this morning's biggie is coming up at 10am with ISM Manufacturing, one of the most important pieces of economic data next to NFP.