MBS Live Recap: Strong 10yr Auction Reinforces Friendly Trend

Bonds charged into the domestic session making surprisingly swift gains amid a relative absence of justification.  We talked more about that in the AM commentary. The key event since then has been much easier to identify.  Yields clearly moved higher in anticipation of the 1pm 10yr Treasury auction, and immediately adjusted lower after the strong results.  While it wasn't enough to get us back to the day's best levels, simply holding a 4-5bp gain on the day is a big victory in technical terms.  MBS didn't do quite as well but are nonetheless near their best levels in months.

Econ Data / Events
Market Movement Recap
09:11 AM

Stronger overnight with Europe.  More technical triggers and short-covering snowballs in Treasuries.  10yr down another 5bps at 1.49%.  MBS lagging a bit, with 2.0 coupons up 6 ticks (.19).

10:53 AM

The 9:30am NYSE open brought additional positive bond market momentum, but it may have resulted in strong enough levels to prompt profit taking and/or new short positions.  Yields were as low as 1.472 and are now up to 1.496.  UMBS 2.0 coupons bounced an eighth of a point lower.

01:08 PM

sigh of relief rally after the strong auction.  10yr was getting close to 1.51 and is now back around 1.49.  UMBS 2.0 coupons are several ticks improved in the past 8 minutes, now close to a quarter of a point higher on the day at 101-11 (101.34).

03:11 PM

10s crossed the 3pm mark down 5bps at 1.487--a very strong showing and essentially right in line with May 7th's lows.  Any better and we'd be back to March 4th levels.  MBS have been sideways since the last update (just under a quarter of a point higher on the day in 2.0 coupons).

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