Thursday Curse Continues But It Was Still a Good Day for Bonds
Although bonds won't be able to say they broke 2021's perfect record of selling on Thursdays (based on the 3pm CME close... there's a bit of time left before the 5pm close), it was a decent day nonetheless. In fact, it could have been much worse after the weak 7yr Treasury auction. Rates rose in response, but not as much as they might have. 10yr yields are trading near the 1.62% technical level this afternoon--much better than the 1.7+ levels seen this time last week. Today's video discusses whether this is enough strength to confirm a shift in the prevailing rising rate trend.
Fed MBS Buying 10am, 1130am, 1pm
Jobless Claims 684k vs 730k f'cast, 781k prev
Q4 Final GDP 4.3 vs 4.1 f'cast/prev
7yr Treasury Auction 1.300 vs 1.278
Bid-To-Cover Ratio 2.23x vs 2.28x avg
(verdict: very weak, but not as bad as last time)
Bonds were modestly weaker in Asia but bounced back by the start of the US session. Little-changed but slightly stronger to start. 10yr down 1.4bps at 1.598. MBS are up 2 ticks (+0.06). No reaction to econ data (Claims and GDP both stronger).
Moderate additional gains up until 11am, but bouncing back since then. Treasury yields bottomed out a bit sooner (just before 10am) and are now back to unchanged. Based on stock/bond correlation, month-end rebalancing tradeflows are likely in play as well as general anxiety ahead of the week's final Treasury auction (both factors speak to more Treasury-focused weakness and/or MBS outperformance).
Another weak 7yr auction (though not as bad as the last one). Bonds quickly to weakest levels of the day, leaving MBS 'unchanged' and 10yr yields 1.4bps higher. Definitely not the same level of selling pressure this time around. Still some hope for resilience near these levels.
Bit of back and forth following the auction with at least a few moments of concern as yields jumped over 1.64%. Resilience is still in the works with yields down to 1.626. 2.5 UMBS are up 2 ticks (0.06).