Decent Recovery After a Rocky Start
Bonds sold off right at the start of the overnight session with yields nearly matching the recent overnight high from last Tuesday. Losses continued into the domestic session. Oil, inflation concerns, Fed rate hike expectations, technicals, and curve trading are/were all on the table as potentially contributing to the move. Case in point on "curve trading," 30yr bond yields closed near their best levels in 3+ weeks while 5yr Treasury yields continued surging to their highest levels since before the pandemic. This reflects Fed rate hike expectations (in turn a reflection of oil/inflation concerns) and the fact that the longer-term outlook takes a hit as the shorter-term challenges increase.
Fed MBS Buying 10am, 1130am, 1pm
Bonds weaker from the start of the overnight session. Extremely high volume. 10yr up 4+ bps at 1.616% and 2.5 UMBS down nearly a quarter point.
Nice push back over the past half hour with MBS now within 1 tick of 'unchanged' and 10yr yields only 1bp higher at 1.584%.
Bonds lost some ground into the 1pm hour, but rallied back to the day's better levels heading into the 2pm hour. Right in line with the last update.