Evidence For a Ceiling Continues to Accumulate
All the normal disclaimers are in order:
- This is a rising rate environment until proven otherwise.
- Floating is best thought of as an intraday endeavor.
- Things can always change very quickly.
- Any notion of a ceiling is best measured in days and weeks for now.
And the list goes on. With the disclaimers out of the way, we can talk about the mounting evidence for a consolidation that puts an end to the rising rate trend of early 2021. Today may be the first day where it makes any sense to do so, even if it falls well short of making any guarantees.
Fed MBS Buying 10am, 1130am, 1pm
Bonds added to yesterday's late-day strength with a bit of follow-through in Asia. EU bonds were weaker at the open and pulled TSY yields slightly higher, but not out of positive territory. 10yr down 1.2bps at 1.695 and 2.5 UMBS up 2 ticks (+0.06).
Tentative, early gains giving way to better mid-day gains. Fed's Treasury buying operation may have helped. There are also a few decently-sized block trades reported through CME, with one recent example possibly helping drive additional strength. 10yr yields down 4bps at 1.66+. MBS are up a quarter point.
Bonds have been sideways near the day's best levels since the last update (2.5 hours, give or take) but with MBS underperforming just slightly. 2.5 coupons are 3 ticks (.09) lower over that time, but still up more than an eighth of a point on the day.
MBS-specific weakness ended shortly after the last update and they joined Treasuries in an afternoon sideways grind at or near the day's best levels. Essentially all of today's gains could be chalked up to tradeflows and technicals (i.e. bonds are not reacting to any new news).