During yet another morning without significant events on the calendar, bond markets have finally found cause to end their 3-day losing streak. To be fair, European bond markets found that cause, and Treasuries are simply watching and following.
There will likely be a lot of talk about stock market weakness coinciding with bond market strength today. It's true that stocks are playing something of a supporting role, but the clearest correlations are with European bond markets where new lows/highs in German Bunds have coincided perfectly with lows/highs in Treasuries.
Treasuries may begin to break away and 'do their own thing' to some extent now as the European session is winding down and with the 10yr Auction approaching at 1pm. MBS are underperforming just slightly, but have still managed to hold on to small gains. Keep in mind that today's prices are lower than yesterday's due to the roll (i.e. today's prices for Fannie and Freddie 30yr Fixed MBS are based on July coupons while yesterday's were based on the soon-to-be-retired June coupons).
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