Do Today's Gains Mean The Selling Spree is Over?
After some initial weakness brought 10yr yields back in line with yesterday's highs, bonds managed to calm down enough eke out a small victory by the 3pm close. This is a welcome change in light of the recent selling spree, but that change had already occurred as of yesterday. Today's mostly-sideways tone is better viewed as a confirmation of yesterday's leveling-off. From here, the goal will be to determine whether this new consolidation is here to confirm recent weakness or to take up arms against it. From a strategy standpoint, although there's a chance this means the selling spree is over, we'd still need to see a stronger move down and out of this week's range to confirm it.
Fed MBS Buying 10am, 1130am, 1pm
Jobless Claims 362 vs 335 f'cast, 351 prev
Q2 Final GDP 6.6 vs 6.6 f'cast/prev
Chicago PMI 64.7 vs 65.0 f'cast, 66.8 prev
Inconsequentially stronger to start the overnight session, then weaker during European hours. Yields up 1.5bps to 1.54% and MBS down almost an eighth--small scale moves in the recent context.
Slow, steady gains throughout the day as the decompression of the recent selling spree coincides with a modest buying bias among month/quarter-end trading needs. 10yr now down 1bp at 1.515 and 2.5 MBS up nearly an eighth of a point.
Uneventful afternoon with bonds showing no impressive evidence of month-end trading impacts. Both 10yr yields and MBS remain at the same levels as the last update.