Decent Day, But There's a Catch
Bonds improved today! The rally was moderate by typical standards, but it feels like a huge victory in light of the 2yr highs in rates seen yesterday. It's not very different from last week's resilience. At the time, we were concerned that it could be a trap (or at least cognizant of the possibility). This time around, the same reminders are in order. It's pretty much that simple until and unless we see a much bigger push toward lower yields/rates. Even then, we need to see how bonds are doing after next week's Fed announcement before considering any tweaks to the early 2022 rising rate narrative.
Fed MBS Buying 10am, 11:30am, 1pm
Housing Starts.......1.702m vs 1.65m f'cast, 1.678m prev
Building Permits ....1.873m vs 1.701m f'cast, 1.717m prev
Flat to slightly weaker overnight with pressure from Europe at 2am. A bit of a recovery since then with better buying at 8am. 10yr yield half a bp lower at 1.87 and 3.0 UMBS up 6 ticks (.19).
Resilience/gains continue with 10yr down 2.5bps at 1.85--the lows of the day. UMBS 3.0 coupons are up nearly 3/8ths of a point.
Modest additional gains after strong 20yr bond auction. 10yr down more than 4bps at 1.832 and MBS up more than 3/8ths of a point.
Similar levels to last update at the 3pm close. The day has been a gradual rally from the outset with gains plateauing in the the PM hours.