Potentially Decent Day Turns Sour After 10yr Treasury Auction

The first day of the new week began innocently enough.  In fact, it was arguably a strong start with MBS up roughly a quarter of a point from Friday afternoon's lows for much of the morning.  Gains stuck around into the noon hour, although they were starting to look a bit less sturdy.  It wasn't until the 1pm auction of 10yr Treasury notes that things really began to deteriorate.  The auction yield was almost 3bps higher than expected--a "miss" that is entirely consistent with the amount of weakness seen this afternoon.  10s hit the 3pm CME close up more than 4bps at 3.36 and MBS were down roughly an eighth on the day (but nearly 3/8ths from the AM highs).

Econ Data / Events
    • 10yr Treasury Auction
      • 3.330 vs 3.304 expectations
      • bid-to-cover 2.37x vs 2.43x avg
Market Movement Recap
09:21 AM

Very slightly weaker in Asia, but then steadily rallying in Europe.  There are no overt market movers.  10yr yield down 3.6bps at 3.279.  MBS up nearly a quarter point.

01:04 PM

Weak 10yr auction and bonds turning red.  10yr up 1.5bps at 3.331.  MBS down 2 ticks on the day but nearly a quarter point from the highs. 

02:18 PM

Additional weakness now, mostly for Treasuries.  10yr yields are up 4bps on the day at 3.356 and MBS are still at the lows of the day, down 2 ticks (0.06) on the day and a quarter point off the highs. 

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