In the absence of heavy-hitting domestic considerations such as last week's impressive slate of economic data and events (NFP, FOMC Announcement, Etc.), markets quickly got back to the familiar game of paying lots and lots of attention to Europe overnight and looking a bit confused during the domestic session. This is especially true for bond markets, which tend to go sideways when confused, as opposed to stock markets which tend to keep on going in whichever direction they were going. With all this in mind, Europe motivated a big "risk-off" trade yesterday and a big "risk-on" trade today. Bond markets have done a seemingly impressive job of holding sideways since the domestic open, especially considering the continuing advance in equities markets. There's no "but" here... Bonds actually have held flatter than we'd expect given the recent connection in the stock lever. MBS never went lower than 103-04 today and kept the range exceedingly tight at a mere 4-5 ticks. 10yr yields were easily contained inside a 2bps range. The scary thing here would be if this pans out as a consolidation for another move higher in yield. The decline in volumes suggests that could indeed be the case, but from a purely technical standpoint, despite the weakness (and the fact that it undoes all of yesterday's strength), we didn't come close to making new high yields (or price lows in MBS).
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Live Chat Featured Comments
David Gaffin : "Yes I did Tim, not a fan"
Tim Mitchell : "did you guys get the memo on the Fixed HECM going away 4/1? "
Andy Pada : "Interesting how GDP which seems to be ostensibly based on fiscal tightening in 2013 doesn't exist in 2014."
Victor Burek : "has the CBO ever been right with any of their projections?"
Victor Burek : "was thinking that too...that means in 2018 ue rate would have to be in the 4's?"
Jason York : "so somehow unemp drops over 2% to average 5.5% in 2015-2018, from 2014?"
Thomas Nelson : "Does that mean they see no fiscal tightening in 2014?"
Matthew Graham : "RTRS- CBO PROJECTS U.S. UNEMPLOYMENT RATE AT 8.0 PCT IN 2013, 7.6 PCT IN 2014, AVERAGE 5.5 PCT 2015-2018 "
Matthew Graham : "RTRS- CBO PROJECTS U.S. GDP GROWTH OF 1.4 PCT IN 2013, DUE LARGELY TO FISCAL TIGHTENING; GDP GROWTH TO REACH 3.4 PCT IN FY 2014, AVERAGE 3.6 PCT IN 2015-2018 "
Matthew Graham : "Perhaps the most interesting thing is the comparison between now and then with respect to US Treasuries ("then" being march/april 2012). The massive tightening in Greece's spreads coincided with our pop higher in yield (and an FOMC Announcement). Back then, we had Greece reverse course in a big way, paving the way for core debt yields to fall. Not the case this time, hence no triumphant 1-2 day bounce back to December levels."
Chip Harris : "resistance at 103-07"
Matthew Graham : "tallest green line is Greece, blue is Portugal, greenish/yellow Ireland, Orange Spain."
Matthew Graham : "I just made a cool chart. Credit spreads between EU periphery and EU Benchmarks. This says nothing of the direction of the EU ECONOMY, simply that concerns of a collapse have backed away from their scariest levels: http://tinyurl.com/adx5jfd"
Gus Floropoulos : "not to sound overly optimistic, but we are within the recend range on 10's, for what it's worth as long as we don't breakout and trade in this confined range we can at the very least have a better approach on locking"
Mike Pennington : "10 minutes from now we will be at 103.29"
Mike Drews : "is this a mini break..like in tennis?"