Stronger Data Proves No Match For The Sideways Grind
Bonds have done a good job of clearing hurdles of various sizes over the past 2 weeks. Last week's inflation data presented the biggest recent risk, but this week's Fed Minutes also raised some concerns. This morning's example came courtesy of a much stronger Markit Services PMI reading, but it was no match for the well-entrenched range trade in longer term yields. 10yr Treasuries briefly hit their highs of the day, but then settled in to the same sideways-to-slightly-stronger pattern seen yesterday afternoon.
Fed MBS Buying 10am, 1130am, 1pm
Services 70.1 vs 64.5 f'cast
Manufacturing 61.5 vs 60.2 f'cast
Existing Sales 5.85m vs 6.09m f'cast
sideways to slightly stronger overnight. Uneventful volume and volatility. Modest gains in Europe with a bit of spillover helping US 10s start 1bp lower at 1.618. UMBS 2.5 up 2 ticks (0.06) at 103-15 (103.47).
Markit's Services PMI did some damage to bonds, pushing 10yr yields back up to overnight highs (+0.6bps at 1.634). No major reaction to slightly weaker Existing Home Sales as the assumption is that it's driven by an inventory crunch.
Low volume/volatility persists with Treasuries roughly unchanged and MBS just a shade stronger. Several Fed speakers on the circuit, but nothing notable and new.