It's been a pleasantly resilient day for MBS and Treasuries so far. After a completely uneventful overnight session, both opened just slightly weaker. Jobless Claims were stronger than expected, but bond markets improved anyway. Incidentally, German Bunds were just falling under 1.0% again at the same time.
The 10am economic data was also better than expected with Existing Home Sales coming in at 5.15 mln vs a 5.02 mln forecast and the Philly Fed Index at 28.0 vs 19.2. This put an immediate crimp in the rally that had been underway, but there has been no major retreat back into weaker levels. In fact, both MBS and Treasuries are still in positive territory and 10yr yields are just .007% off their best levels.
What's up with that? As always, there's no ONE reason, and neither can we know the most relevant reason, but here are the contenders. For starters, the Philly Fed data was much worse than the headline indicated. Most of the internal components were weaker than they were previously with the 6-month outlook being one of the only exceptions. Beyond that, the European market influence remains as the British 10yr (in focus this week more than most) has been on a tear since 6am, leading the charge for Germany and the US.
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