Deceptively Interesting Trading Range Ahead of Fed
After a move up from 1.25 to nearly 1.30% on Monday, 10yr yields dropped back below 1.25% almost immediately on Tuesday. Those looking for reasons might find explanations ranging from Chinese stock market weakness to covid case counts to pre-Fed jitters. In general though, bonds have been sideways between 1.22 and 1.31 since last Wednesday. It's only when we move outside that range that something new and interesting will be happening in terms of bigger picture momentum. Wednesday afternoon's Fed announcement brings the next big chance at volatility.
Fed MBS Buying 10am, 1130am, 1pm
Durable Goods 0.8 vs 2.1 f'cast, 3.2 prev
moderately stronger overnight, mostly at EU open, but with an eye on heavy selling in Chinese equities. 10yr dropped from 1.29 to 1.25. MBS are starting out more than an eighth of a point higher. Durable Goods barely registered a response despite a reasonably big miss (offset by positive revisions, perhaps, or traders just don't care).
No major reaction to 5yr auction. Bonds have been flat all day after the initial rally heading into domestic hours. MBS are up a quarter point now and 10yr yields are down 6+ bps at 1.233%.