Bond markets were almost perfectly flat overnight and held a narrow 2bp range in 10yr Treasury yields. MBS started out in slightly negative territory and were soon greeted by GDP data that was roughly in line with forecasts (2.6 vs 2.7) and Jobless Claims that were much lower (311k vs 325k).
By all rights, the Claims data could have made for additional morning weakness, but paradoxically, bond markets improved. The weaker Pending Home Sales data at 10am had no objection.
To a large extent, Treasuries and MBS marched to the beat of their own drums throughout the morning--a fact that suggests some pervasive, underlying source of demand. Without having an opinion on whether or not that demand continues or soon meets resistance, we can conclude that market participants have reasons beyond the economic data to trade how they're trading. This isn't uncommon heading in to the end of the month. Sometimes it works in our favor and tentatively, this looks like one of those times.
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