Respectable Recovery After Morning Drama
"Drama" may be a bit of an overstatement, but bonds were weak enough this morning to cause some concern about the week's prevailing message (i.e. that the 2021 uptrend in rates is strongly considering taking the month off in April). As the day progressed, yields inched back toward lower levels. While Treasuries ultimately failed to make it back to positive territory, MBS succeeded. The outperformance can be attributed to light MBS supply over the past 2 days as well as Treasury-specific headwinds (such as next week's condensed auction cycle).
Fed MBS Buying 10am, 1130am, 1pm
Core Producer Prices (y/y) 3.1 vs 2.7 f'cast, 2.5 prev
Much weaker overnight in an apparent confirmation of a sideways trend (i.e. not a rally trend). 1.62% held firm in 10yr yields. After a big bounce there, we're up to 1.68% this morning. MBS outperforming with 2.5 coupons down only 6 ticks (.19) to 103.00. Inflation data delayed due to BLS website issue.
Decent bounce back starting around 9am. The move coincides with an uptick in stocks--a common refrain in recent months and one that continues to suggest money managers moving into and out of (and back into) both sides of the market. 10yr now up only 2.7bps at 1.653 and 2.5 UMBS down only 2 ticks (.06) on the day.
MBS are now nearly back to unchanged levels despite Treasury yields bouncing back toward slightly weaker levels. 2.5 UMBS are down 1 tick on the day at 103-05 (103.16) and 10yr yields are up almost 3bps at 1.655%.
Bonds shied away from a full-fledged break into positive territory as yields bounced gradually over the past 3 hours. 10yr yields are back up 3.6bps on the day at 1.662 and UMBS 2.5 coupons are down 3 ticks (0.09) after briefly turning positive on the day just before noon.