Bonds Struggling With Inflation Implications
Although the bond market is still a net beneficiary from the war in Ukraine, rates have increasingly been running into resistance when trying to make new lows. For the 4th time in 6 days, 10yr yields tried to move below 1.70 and bounced. Other risk metrics (stock sell-off, oil rally) have covered ground in a more directional way over that time. Oil is actually part of the problem for bonds. The higher it goes, the more the bond market has to consider the inflation implications. To make matters worse, the only thing certain to help oil calm down would also remove much of the bond market's safe-haven buying demand from recent weeks.
Fed MBS Buying 10am, 11:30am, 1pm
initially much stronger to start the overnight session. Steady selling since then--especially since 7am ET. 10yr up 6.6bps at 1.803. MBS down 10 ticks (.31).
Moderate recovery at the 9:30am NYSE open, then a slight give-back in the past hour. MBS are down only 7 ticks (.22) now and 10yr yields are up only 2.7bps at 1.765.
Generally sideways to slightly stronger since noon. 10yr now up only .7bps at 1.746 and 3.0 UMBS still down 7 ticks (.22).
Reversal immediately following the last update. Could be corporate bond issuance or just random 3pm CME close volatility. 10yr now up 3.3bps at 1.77 and MBS down 3/8ths at 100-24 (100.75).