For more than a week, bond markets have flirted with a break into the best levels of the year. On several occasions 10yr yields have looked all but wed to the idea. Such a wedding would take place with a move through the 2.4's.
While that's not something that was exceptionally possible until next week's big-ticket events, a crowd had gathered at the altar. In other words, most of the week's activity has taken place between 2.45 and 2.50. Yesterday's weakness caused some concern that bond markets might be getting cold feet as Treasuries rose to 2.52. That left today as a bit of a wild card that could either reinforce the cold feet or reinforce the potential to break the range.
Both German Bunds and US Treasuries had a strong, simultaneous bounce off yesterday's weakest levels overnight. They've been improving ever since. The biggest market mover of the day for Treasuries and MBS was the stronger-than-expected Durable Goods data. Normally, stronger data has the opposite effect on bonds, but in today's case, one of the key components was so heavily-revised that it has a net-negative implication on next week's GDP reading.
After starting the day in slightly weaker territory, MBS quickly turned positive after the Durable Goods data and have added to gains since then. Weakness in equities markets has helped. Fannie 3.5s are up just over an eighth of a point while 10yr yields are down nearly 3bps. The S&P is down roughly 10 points.
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