MBS Recover Some Losses Thanks to 3yr Auction

The day began with a strong bond auction in Germany setting the tone in the overnight session.  US traders quickly pushed yields back in the other direction, but only modestly.  Bonds remained sideways to slightly weaker until the 3yr US Treasury auction at 1pm.  It came out very strong (although in large part thanks to the weakness that preceded it).  Nonetheless, it was enough to put the ceiling in for the day as far as yields were concerned--especially shorter term yields.  Due to their shorter duration profile, MBS benefited from the auction more than 10yr Treasuries.  

Market Movement Recap
09:04 AM

Sideways to slightly stronger overnight, but selling kicked in at 8:20am.  10yr up 1bp at 3.515.  MBS down an eighth.

12:42 PM

Steady selling.  Now at weakest levels.  MBS down a quarter point and 10yr up 2.5bps at 3.532

03:44 PM

Decent bounce back in the PM hours.  MBS now down only about an eighth.  10s still near highs, up 2bps at 3.526.

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