Bond Markets Slightly Weaker Overnight; Slow Session so Far
Overnight trading has been uneventful for Treasuries, despite losing some ground. The appetite for 'risk' shifted in favor of equities markets (and away from bonds, thus hurting rates) from the outset. For now, that's the only obvious takeaway from Asian and European trading hours.
The not-so-obvious takeaways are likely doing more to cause moderate weakness in Treasuries and MBS this morning. After following German Bunds fairly well overnight, Treasury yields gapped higher right around 8:20am. This is almost always a sure sign of CME traders being lined up to sell at the 8:20am CME open (electronic trading was already going on overnight, but the pit open is still a significant event for bond markets).
Combined with the low volume and light participation, it doesn't take nearly as many bearish traders to move markets on days like today. Bottom line, there's a "sell" bias in play since the CME open, and it's effects are somewhat magnified by thin trading conditions.
10yr yields are up 1.6bps so far at 2.538. Fannie 3.5 MBS are down 4 ticks (.125) at 102-10. There is no significant scheduled data today.