We haven't seen bond markets move this sideways all the way through morning hours in quite some time (weeks at least). 10yr yields have been within a 0.01% range (2.539 to 2.549) after the overnight weakness leveled off into the domestic session. Said weakness came courtesy of stronger economic data in The UK and an auction failure in Germany (they didn't get enough bids to cover the auction amount).
MBS have been outperforming on a day-over-day basis. That means MBS prices are closer to yesterday's best levels compared to Treasury yields. On an intraday basis, the two are moving in fairly close correlation, both neat their best levels since entering a sideways range at 8:40am.
The extreme level of containment is most easily ascribed to the FOMC Minutes coming up at 2pm. Markets have grown increasingly anxious for these after yesterday's comments from Dudley suggested a change in the Fed's overall exit strategy could be among the topics.
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