Bond Markets Weaker Overnight; Bouncing Back Into Domestic Session
After yesterday's decisive rally, Asia's first conclusion was that the rally had gone far enough. Asian accounts sold Treasuries somewhat aggressively in the first part of the overnight session, taking 10yr yields from 2.44+ to 2.49+.
The bad times kept rolling for a few hours of the European session, but never bad enough to lift German Bund yields more than a few bps off the all-time closing lows seen yesterday. Selling reversed course around 5am, and Bunds pushed into new lows yet again.
Treasuries were happy enough to come along for the ride with the Bund rally. 10's made it back to 2.46 and have been going mostly sideways since then. MBS are 3 ticks weaker at 102-12 (Fannie 3.5s) and going even more sideways than Treasuries.
Why are MBS red and Treasuries green right now? Treasuries are technically in the green because the official close is at 3pm. MBS's close is at 5pm. So the day-over-day changes are based on those times respectively. Because there was more rallying from 3 to 5pm, MBS are measured against those stronger levels while Treasuries only have to beat the 3pm levels to be green.