Still on a Fence as Bonds Work Through Early-Week Risks
We closed out last week on a fence about the short term outlook for rates. On the one hand, Friday was fairly weak. On the other hand that weakness followed 3 great days of gains and could furthermore be rationalized as defensive positioning ahead of early risks in the week ahead. We made it through half of those risks on Monday (3 and 10yr Treasury auction) with minimal damage, but certainly no major gains. As such, bonds look like they're keeping their options open for now. We hope to get a better lay of the land after tomorrow's events (CPI and 30yr bond auction).
Fed MBS Buying 10am, 1130am, 1pm
Slightly stronger overnight, mostly thanks to friendly comments from ECB's Lagarde. 10yr down almost 2bps at 1.344 and 2.0 UMBS up almost an eighth at 101.5
Gains erased. No overt market mover apart from general shift after the 9:30am NYSE open. 2.0 UMBS now 1 tick (0.03) weaker on the day and 10yr yield now unchanged.
Additional weakness after 3yr Treasury auction. 10yr now up 1.4bps to 1.375 and MBS down almost an eighth.
No additional damage after 10yr auction (mixed results, but not bad). 10yr down just slightly since auction, but still 1bp higher on day at 1.37%. UMBS 20 down 2 ticks (0.06) on the day.
post-auction strength faded at the 1.36% level (ceiling earlier today, but now a floor). Slightly weaker after 3pm CME close, now up 1bp to 1.37%. MBS still well off lows with 2.0 coupons unchanged.