Have you heard the one about Ferrari moving the bond market? Well, now you have. In an apparent mystery move before the start of the domestic session, stocks and bond yields dropped in unison. It wasn't the biggest move ever, but it was abrupt enough to suggest discrete motivation. The only suspect at the scene of the crime? Ferrari earnings! What's the takeaway? Simply put: earnings season is in full swing. Stock/bond correlation has increased, and could continue to be a factor for small-scale volatility in a week where the dominant focus remains on Friday's jobs report.
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Fed MBS Buying 10am, 1130am, 1pm
Overnight session began weaker (and quiet, with much of Asia out on holidays this week). EU yields were modestly higher. Treasuries followed, but rallied back at 7:45am as stocks tanked, apparently on Ferrari earnings. 10yr yields unchanged at 1.603. MBS nearly unchanged at 103-24 (103.75).
More stock/bond correlation at the 9:30am NYSE open. 10yr yields now down 3.5bps on the day to 1.564. UMBS 2.5 and 2.0s both up more than an eighth.
Quick but relatively small pop higher in yields after Yellen comments (more here). Supportive bounce already kicking in. MBS back to unchanged levels. 10yr yields still slightly lower on the day, but 2 bps off the previous lows.
Super sideways all afternoon after the Yellen-inspired correction traveled another 2bp higher in 10yr yields (now unchanged on the day). UMBS 2.5 coupons didn't lose much more ground and are also unchanged.
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