Strong Start Balanced by Potential Resistance

Bonds rallied early in the domestic session and again heading into the noon hour before finally giving up a portion of the gains heading into the PM hours.  A strong correlation with stocks, oil, and EU bonds suggests a simple "risk-off" thesis is as good an explanation as any.  In short, markets are repositioning for a cooler global economy and what hopefully turns out to be the defeat of runaway inflation.  Declaring victory on inflation will take time and data.  As such, it may serve to limit the downside potential for yields in the short term.  Today is possibly an example of those limitations in play as 10yr yields only made it down to 2.78% lows compared to 2.79% lows last Friday.

Econ Data / Events
  • Factory Orders
    - 1.6 vs 0.5 f'cast
    - Prev month revised up to 0.7 from 0.3

Market Movement Recap
08:50 AM

Flat to start but gaining ground as global markets move risk-off (lower bond yields and stock prices).  re-upping of Friday's pared trading positions is also a factor.  10yr down 5.3bps at 2.836 and MBS up almost a quarter point.

10:00 AM

Resistance in 10s just over 2.80% and now back up to 2.834% (still 5.5bps lower on the day).  MBS are still up 6 ticks (.19) but roughly an eighth of a point off the best levels. 

10:59 AM

Off roughly 1/8th from AM highs, but illiquidity accounts for some of that weakness.  10yr yields are still down 6.6bps at 2.824, but up slightly from the 2.805 lows. 

03:10 PM

Best levels of the day at noon, and just modestly weaker since then, largely tracing a recovery in stocks.  10yr down 7bps at 2.822.  MBS up just over a quarter point at 101-02 (101.06).

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