No Whammies From Powell, 20yr Auction Helps
After a clear rejection of the 3.72% floor in 10yr yields overnight, bonds continued drifting into negative territory ahead of Fed Chair Powell's congressional testimony today. As the Q&A portion got underway, it soon became clear that there would be "no whammies." In other words, Powell wasn't saying anything that hadn't already been said last week and the market's understanding of the Fed's reaction function remains entirely appropriate. Yields stabilized and inched lower as a result. Better gains followed the strong 20yr bond auction at 1pm ET with longer-term Treasuries and MBS getting back to 'unchanged' by the 3pm CME close.
Moderately weaker overnight with additional selling ahead of Powell testimony. 10yr up 6.2bps at 3.781. MBS down a quarter point.
Pushing back into stronger territory after 20yr bond auction. 10yr almost back to unchanged at 3.725. MBS just hitting unchanged.
Leveling off near unchanged in both MBS and Treasuries. 10yr at 3.72 and MBS up 1 tick (0.03). Not much movement since before 2:30pm ET.