Asian, European, and domestic markets have all agreed: it's a quiet trading day. The light volumes make for a situation where it doesn't take much doing to move trading levels. The result is an amount of market movement that looks like any other day, while the underlying level of activity is quite a bit smaller.
Without any meaningful market-movers overnight, bonds took cues from equities as well as technical trading considerations. In that regard, last week's positive momentum showed early warning signs of reversing by Friday and we have moderate follow-through on that reversal this morning.
Emphasizing the slowness and lack of trade-inspiring events, the fastest-paced movement of the day was brought on by mere observation of other trades. As we sometimes discuss "traders watching other trades" can be a market mover in and of itself.
This was the case around 10:30am today when several bigger trades in Treasury futures made for an additional move into weaker territory for Treasuries and MBS. They've both since recovered most of that weakness however, leaving the day-over-day changes in just moderately weaker territory--about an eighth of a point in Fannie 3.5s and just under 2bps higher in 10yr yields.
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