The title sums it up. Bonds are having a bad time. Fed rate hike expectations started this unpleasant party last week and economic data added to the drama this week (chiefly, Wednesday's ADP employment data).
This morning saw fairly modest pressure from the overnight session and the morning's press conference with European Central Bank (ECB) president Mario Draghi. Long story short: Draghi was a bit more hawkish than expected.
His hawkishness was reiterated in the afternoon when newswires suggested he'd spoken to EU leaders about the need to get their fiscal houses for the day when the ECB isn't in the stimulus business.
Some combination of that news and several headlines regarding the impending debt ceiling showdown pushed bonds to even weaker levels in the afternoon. These aren't necessarily the only 2 market-movement considerations, but they were the 2 most overt pieces of news during the mid-afternoon sell-off.
10yr yields ended the day up 5bps at 2.61. Fannie 3.5s were down 3/8ths of a point at 101-03. Keep in mind that tonight was "the roll" for 30yr fixed MBS. The next coupon in line closed at 100-29 today, temporarily making it look like MBS lost 18 ticks.
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