Weaker data, slumping stocks, Iraq, and an awesome 30yr Bond Auction all helped Treasuries and MBS by varying degrees today. The morning data's job was to arrest the drift toward weaker levels early in the day. That mission succeeded.
Trading was sideways to slightly stronger from there, but was essentially unchanged by the time the auction rolled around. After much stronger-than-expected results, the rally commenced in earnest. During that time, extra 'oomph' potentially came courtesy of troubling headlines regarding Iraq and a fairly large selling-spree in equities markets.
By the end of the day, 10yr yields made it very close to the important technical level of 2.57 (2.5753 lows). Eerily, S&P futures revisited their previous highs leading up to last week's ECB meeting. The worse case scenario would be to see both yields and stocks making a strong bounce higher tomorrow, but if 10's are able to break below 2.57, it would confirm a technical shift away from the selling spree that began in late May.
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