The amount of geopolitical turmoil in the world today is not materially better than yesterday, but without new surprises to fuel safe-haven demand, bond markets found no reason to extend the rally. That said, if the rally was somehow overdone or made stronger by something like 'snowball buying,' we would know it today. The fact that there wasn't a more pronounced pull-back is a testament to the gravity of the situation and the real presence of safe-haven demand yesterday.
MBS started the day about 3/32nds weaker and are now heading out in roughly the same territory. The weakness was more severe heading into the noon hour, but 10 yields had a firm bounce at 2.50%, which marked the end of selling momentum in bond markets for today.
Weekends can always bring significant developments when it comes to geopolitical market movers. More often than not, if US bond markets have rallied on geopolitical risk heading into the weekend, they move in the opposite direction the following week. As far as how that plays out this time, volatility is potentially higher than normal considering a relative lack of calendar events in the week ahead. That may leave markets even more sensitive to headlines as there's not much else going on.
The week after that is the polar opposite, with the first look at Q2 GDP, an FOMC Announcement, and NFP on Friday. It may well set the tone for the next major move.
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