How Low Can Stocks Go? (Bonds Want to Know)
Bonds improved overnight and again after this morning's Philly Fed data (a dark horse market mover to be sure). 10yr yields hit their lowest levels in 3 weeks, and at one point were almost 40bps below the highs of 3.2% seen 2 weeks ago. Bonds may have already been destined to reject 3.2% and recover, but there's no question that the heavy selling in stocks has really accelerated the recovery--so much so that we need to wonder how sustainable it is in the event that stocks find their footing. Without the stock market influence, it's reasonable to think bonds would still be more sideways compared to the past few months based on data and events, but "more sideways" doesn't necessarily portend additional improvement.
Fed MBS Buying 10am, 11:30am, 1pm
Housing Starts 1.724 vs 1.765m f'cast, 1.728m prev
Building Permits 1.819 vs 1.812m f'cast, 1.879m prev
Initially weaker overnight. Big rally in Europe. Stocks sliding again (not as much as y'day so far). Bonds liking the weak Philly Fed data. 10yr down over 9 bps at 2.79. MBS up 3/8ths of a point.
Treasuries trending gently weaker since 9:30am. MBS have been more sideways but also coming off highs. 10yr down 4.2bps at 2.842 and 4.0 coupons up only 10 ticks now (.31).
MBS still in the day's range, but near the lower boundary, down more than eighth from highs. 10yr yields grinding steadily/calmly higher, now down only 3.3bps on the day at 2.852.
Treasury yields at highs, but trading remains uneventful. Still in line with levels from the last update. MBS are holding steady with gains of 0.31