Bonds have done a good job of clearing hurdles of various sizes over the past 2 weeks. Last week's inflation data presented the biggest recent risk, but this week's Fed Minutes also raised some concerns. This morning's example came courtesy of a much stronger Markit Services PMI reading, but it was no match for the well-entrenched range trade in longer term yields. 10yr Treasuries briefly hit their highs of the day, but then settled in to the same sideways-to-slightly-stronger pattern seen yesterday afternoon.
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Fed MBS Buying 10am, 1130am, 1pm
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Markit PMIs:
Services 70.1 vs 64.5 f'cast
Manufacturing 61.5 vs 60.2 f'cast -
Existing Sales 5.85m vs 6.09m f'cast
sideways to slightly stronger overnight. Uneventful volume and volatility. Modest gains in Europe with a bit of spillover helping US 10s start 1bp lower at 1.618. UMBS 2.5 up 2 ticks (0.06) at 103-15 (103.47).
Markit's Services PMI did some damage to bonds, pushing 10yr yields back up to overnight highs (+0.6bps at 1.634). No major reaction to slightly weaker Existing Home Sales as the assumption is that it's driven by an inventory crunch.
Low volume/volatility persists with Treasuries roughly unchanged and MBS just a shade stronger. Several Fed speakers on the circuit, but nothing notable and new.
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