Still a Decent Week Despite Friday Slide
Thursday morning was exceptionally strong for bonds--perhaps too strong, with too much influence from artificial factors like short-covering and tech-triggered algos. Today's modest weakness reinforces a more sober assessment of the recent trend, and although rates aren't as low as yesterday, that trend is still in good shape.
Fed MBS Buying 10am, 1130am, 1pm
Housing Starts 1.739m vs 1.613m f'cast
Building Permits 1.766m vs 1.75m f'cast
Modestly stronger overnight, but weaker since 8am. There is no clear connection with any calendar event. Domestic traders simply showing up to sell today (booking profits on recent long positions, hedging new corporate issuance, or re-shorting bonds after yesterday's short squeeze).
Very little changed from AM levels. Today is living up to its "place holder" billing. No noticeable market movers in play. 10yr and MBS are both unchanged from yesterday's 5pm levels.
Late day weakness, but nothing too terrible. 10yr yields hit 5pm 1.6bps higher on the day at 1.59%. 2.5 UMBS fell just over an eighth of a point, prompting several negative reprices. Broader corrective trends (the good kind) remain intact for now.