Strong Auction Lost in Shuffle as Bonds Enjoy an Easy Win
Sometimes during massive selling sprees, the trading for any given day gets underway and it's clear that traders holding short positions are on the run. This began in Europe and resulted in sharp pre-market gains for Treasuries. Domestic traders had their bearings by the 9:30am NYSE open and resumed the buying spree. There was no characteristic concession ahead of the 20yr bond auction. Even then, the auction stats were stellar. Despite the initial rally that followed, yields returned in line with the day's prevailing trend by the close. The only takeaway is that bonds had sold off enough for a quick correction. Whether it materializes into anything more remains to be seen.
Fed MBS Buying 10am, 11:30am, 1pm
Existing Home Sales 5.77m vs 5.80m f'cast, 5.93m prev
Weaker at the start of overnight trading, then steady buying into domestic hours--particularly after Europe opened. 10yr down 4.8bps at 2.892. MBS up just over a quarter point.
Bonds re-attacking strongest levels of the day with 10s down 7.5bps at 2.865. MBS are up almost 3/8ths of a point.
Best levels in Treasuries after strong 20yr auction (read more). 10yr down more than 9bps to 2.845. UMBS 4.0 not quite back to best levels, up 9-10 ticks (.28-.31) on the day.
No major change from previous levels although MBS did catch up with the rally a bit. 4.0 coupons are now up 3/8ths of a point and just a few ticks under PAR.