Slightly weaker?! How could we say such things when the MBS chart looks like this:
Don't worry. This isn't exactly "real" due to the roll. The prices on the June 10th side of the chart are for the now-retired June coupons whereas the prices on the June 11th side of the chart are for July coupons. July coupons have been trading for a few months and their prices have always been a bit lower than June's. So about half of the weakness seen on the chart is not really there. If there were no roll, the chart would look more like this:
In terms of Treasuries and big-picture momentum, yesterday's rally took us to the best levels in months. As we've been saying for the past few days, the strong post-payrolls momentum will eventually set up a selling opportunity. So we have to ask ourselves if today's modest weakness is the first indication of that. After all, it does coincide with a bounce at the super-big-picture technical level of 1.44% (which goes all the way back to late 2019).
That said, 10yr yields are only up 1.7bps today at 1.454%--a level that would have been absolutely stellar less than 24 hours ago. Add to that the fact that it's a summertime Friday (i.e. traders may be circling the wagons heading into the weekend and the typically lighter Monday liquidity conditions) and bonds are essentially just clocking out for the week at the best levels in months... unless anything dramatic happens later in the day. Let's hope it doesn't!