Nice Recovery, But Big-Picture Damage Remains
Monday could have been worse. Bonds started out in weaker territory but recovered early in the domestic session. Technicals and repositioning tradeflows deserve as much credit as dovish remarks from the Bank of England. Ultimately, the intraday volatility doesn't much matter as long as yields remain squarely inside their upwardly-sloped trend channel (and they do!).
Fed MBS Buying 10am, 1130am, 1pm
Flat to start the overnight session, then slightly weaker in Europe. Well inside Friday's range, up 2.5bps at 1.663% (10yr), and 2.5 UMBS down 2 ticks (0.06).
Solid buying since 9am. 10yr back to unchanged at 1.64 and 2.5 UMBS now up 2 ticks (.06) at 102-08 (102.25).
Rates bottomed out just before 10am and have been sideways to slightly higher since then. 10yr yields still down .3bps on the day at 1.635 and MBS 2.5 coupons still up an eighth of a point at 102-10 (102.31).