In terms of volume, participation, and holiday closures, today was the most normal trading day in the bond market for several weeks. That was a more unfortunate fact earlier in the day as bonds hit their weakest levels in more than a month. Even at the 3pm CME close, Treasury yields remained higher on the day, but they'd at least improved in the PM hours. MBS outperformed all day, ultimately making it back to nearly unchanged levels by 4pm ET. Data was generally disregarded, further confirming the notion that markets are focused on the omicron narrative. Corporate bond issuance was also an easy scapegoat for weakness early in the day.
Fed MBS Buying 10am, 11:30am, 1pm
ISM Manufacturing PMI 58.7 vs 60.0 f'cast, 61.1 prev
ISM Prices Paid 68.2 vs 79.5 f'cast, 82.4 prev
Flat and calm overnight with Tokyo and London back online. Weakening slightly in domestic trading despite stronger EU bonds. 10yr yp 2bps and MBS down an eighth.
Bonds catching a break to some extent after the slightly weaker ISM headline (and significantly lower "prices paid" component). 10yr now up only 1.9bps at 1.656 and MBS down only 3 ticks (0.09).
Weakest levels of the day at noon, but now back to the best levels. MBS prices are the same as the previous update, but 10yr yields up 2.8bps at 1.665