Bonds Hold Decent Gains to Start New Week
After mixed trading overnight, bonds began the day in the US at relatively unchanged levels before rallying throughout the morning hours. There has been a good amount of correlation between stocks and bond yields over the past week. Oil prices joined that bandwagon on Thursday and the correlation continued right up to the 8:20am CME open. At that point, new trades for the new week along with global growth concerns helped bonds hold their ground despite more of a flat performance in stocks (and a rally in oil). The day lacked any big, obvious market motivations. Traders didn't take any risks pushing technical boundaries, and despite the rally, instead gave the impression that they were settling into a broader sideways range to wait out the standoff between inflation, central bank policies, and global growth concerns.
Fed MBS Buying 10am, 11:30am, 1pm
Empire State Manufacturing -11.6 vs 17.0 f'cast, 24.6 prev
Initially stronger overnight on Asian market weakness (China growth fears). Hawkish ECB = selling pressure in European hours, but still slightly stronger vs Friday. 10yr down 2bps and MBS up one tick (0.03).
Additional gains after the 9:30AM NYSE Open. Some stock momentum spilling over to bonds, but EU bonds helping US bonds avoid following stocks as they bounce back up to opening levels. 10yr down 5.4 bps at 2.873% and UMBS 4.0 up 6 ticks (.19) at 99-18 (99.56)
Gains leveled off after 11am and bonds have been sideways to slightly weaker since then (but still in positive territory on the day). 10yr yields are down 5bps at 2.879 and 4.0 UMBS are up 5 ticks (.16).
Yields and stocks topped out at 2:30pm. Both have been moving in the other direction since then. 10s are back down to 2.88 after trading over 2.89 briefly. 4.0 UMBS are up a quarter point now at the highs of the day.