Stocks vs Bonds; Bonds vs Supply
There's a fairly strong case to be made for stock market weakness helping bond yields remain lower than they otherwise might be in September. As such, we'll be watching the bond market's reaction very carefully in the event of a rebound. Stocks notwithstanding, MBS are coping with higher supply (more locks from originators), which is making it hard for MBS to keep up with gains in Treasuries.
20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th)
Stocks were down at a fairly quick pace overnight--especially in Europe--and the bond market was there to pick up the pieces. 10yr yields improved 4bps to start the day just under .66 and 2.0 UMBS are up an eighth trading near 103.00
Treasury gains extended just slightly as stocks continued to sell. 10yr yields down just over 4bps for a moment. That said, the gains have been reluctant. MBS have been even more reluctant, essentially holding flat with gains of 3-4 ticks (0.09 - 0.125). Stocks are down 2.75%.
Bonds at weakest levels now (though still positive on the day) in was it best described as incidental summertime afternoon trading. A few comments from Fed's Kaplan may have added to the move, but weakness has been gradually increasing since stocks bottomed, mid-day.