Salient, easily-identifiable motivations for bond market movements continue to be elusive. The times of the day where liquidity (numbers of buyers and sellers) shifts gears continue to see the lion's share of activity. Trading has been easier to understand on a broad, thematic level.
Today's theme is similar to yesterday's: investors are a bit uncertain and a bit cautious. Everyone's best guess seems to be that "politics!" is the key motivation (i.e. challenges facing some of the new administration's first actions as well as overseas election uncertainty/implications).
The "uncertainty theme" is reflected in overnight bond market gains as well as stocks stalling at the NYSE Open (and finishing weaker). As stocks fell throughout the day, bond yields moved lower in concert.
The 1pm 3yr Treasury auction provided one final boost for the rally, but that tipped the balance back in favor of sellers. Trading levels deteriorated just a bit heading into the close, although not enough for lenders to reprice. 10yr yields were ultimately 2bps lower vs yesterday, and Fannie 3.5 MBS were an eighth of a point higher.
Join Now or Login to Post Comments