Strong Data, Weak Auction, Weak Bonds

The simplest way to view today's moderate bond market weakness is as a pure and logical reaction to the fundamental market movers.  9:45am brought stronger economic data as well as some unfriendly headlines from the Bank of Canada (BOC).  That was enough to undo a bit of overnight strength.  Then at 1pm, an unequivocally bad 5yr Treasury auction did the rest of the damage.  In the bigger picture, bonds are favoring a trend toward higher yields in January.  Some would suggest this is defensive positioning for the Fed and next week's data.

Econ Data / Events
    • S&P Global PMIs
      • Manufacturing 50.3 vs 47.9 f'cast, 47.9 prev
      • Services  52.9 vs 51.0 f'cast, 51.4 prev
Market Movement Recap
09:54 AM

Weaker after data.  10yr down 1bp on the day at 4.122.  MBS down 1 tick (.03).

11:43 AM

5.5 coupons are now down 3 ticks (.09) on the day but well over a quarter point from the AM highs.  10yr yield are up 1.5bps to 4.147.

01:26 PM

additional weakness after 5yr auction.  10yr up 4bps at 4.172.  MBS down 5 ticks (.16).

04:06 PM

New lows at the close with MBS down 6-7 ticks (.19-.22) and 10yr yields up 5bps to 4.18+.

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