Corporate Bonds Making Life Tough This Week
As feared and expected, the combination of Treasury auctions and a hefty slate of corporate issuance continued to weigh on bonds today. A flat-to-slightly-stronger start quickly gave way to weakness as investors made room for corporate bonds. A large multi-tranche deal from Intel was the worst offender. Traders aren't eager to catch this falling knife until more of the supply is digested (that would be tomorrow at the earliest). At that point we expect at least a few days of recovery before the trend shows its true colors. For today, it was worth a few more bps in 10yr yields and about an eighth of a point in MBS as of 3pm ET.
Fed MBS Buying 10am, 1130am, 1pm
Flat to slightly stronger at first, then more sideways and choppy during EU hours despite a decent rally in EU bonds. Starting out less than a bp lower in 10yr yields at 1.317. UMBS 2.0 coupon up 1 tick.
Selling pressure ramping up after 9:30am NYSE open, but more noticeably after 10am due to a slew of new corporate bonds hitting their "launch" phase. 10yr up 1.4bps to 1.339. UMBS 2.0 down an eighth at 101-02 (101.06).
No new weakness in Treasuries since the last update. Modest additional weakness in MBS (new recovered). Levels are right in line with last time. No reaction to 3yr Treasury auction.