Questionable Taper Talk Conclusions Result in Heavy Selling
The word "heavy" requires some qualification. In today's case, it refers to the quickest pace of weakness seen since last Wednesday after the CPI report. In the big picture, today is a very light example of "heavy." A quick spike in yields makes sense when we consider taper talk as the motivation, but the Fed didn't really say anything remarkably new--especially not when compared to recent Fed speeches by a few of the more hawkish members. Nonetheless, markets ran with it. No one wants to be behind the 8-ball for a taper tantrum, but let's hope this moves in the logical direction of being a false start.
Fed MBS Buying 10am, 1130am, 1pm
Noticeably weaker overnight session as volume and volatility finally start picking up for the week. European bonds led early, but a reversal is in the works since 9am and we're now back to 'unchanged.' 10yr yields were as much as 3bps higher.
And it's gone! Half of the most recent rally just evaporated. Correlation is not causality, but the 10yr yield spike lines up almost perfectly with the bitcoin bounce.
Bonds on the back foot again after the 20yr auction. 10yr yields fought their way to the day's best levels just before 11am, but have been moving higher since then--now up 2bps at 1.66%. UMBS 2.5 coupons are down an eighth at 103-13 (103.41).
Heavy selling after Fed minutes as market takes taper comments out of context (more...)