Heavy Issuance Weighs on Bonds
We knew bonds would be skittish about Treasury auctions this week, but the defensiveness began early owing to a big glut of corporate bond offerings. Amazon led the way, accounting for nearly $20bln of the rather epic $34+ bln on the day. Those are numbers we only ever see when one big player is bringing one of the year's biggest bond offerings to the table. How big is $34bln of investment grade debt if it hits all on one DAY? The best way to answer that is to simply remember the Fed only adds $40bln of new MBS in an entire MONTH. The damage was minimal, all things considered, with MBS only losing an eighth of a point as of 4pm ET and 10yr yields up 2bps to 1.60%.
Fed MBS Buying 10am, 1130am, 1pm
modestly weaker out of the gate in Asia, but bouncing back since then. Treasuries now just slightly stronger and MBS up 3 ticks (0.09) at 104-04 (104.125).
Nothing of note so far. Several fed speakers, but none of their comments have been off the recently beaten path. 10yr yields and MBS both unchanged from last update
Quick pop toward weaker levels just after the last update. 2 potential scapegoats: several new corporate bonds hit the market, and it's the end of the EU trading session. 10yr yields are now up 1.2 bps at 1.591% and MBS are unchanged (about an eighth of a point off the highs.
Additional weakness throughout the afternoon with the best explanation being "issuance" (see today's huddle/video for more). 10yr up about 2.5bps and MBS down about an eighth of a point.