Weaker Treasury Auction, But Only After a Strong Morning
In and of itself, the10yr Treasury auction (arguably the most relevant calendar item for the bond market today) was weaker than recent averages, but only after bonds rallied quite nicely earlier in the day. Geopolitical risks and pre-holiday short covering are potential sources of inspiration (there are no obvious market movers jumping off the page apart from "short covering"). Either way, it made for an extension of a bond rally that looked like it had fizzled out on Monday. MBS didn't fare quite as well, even after accounting for the visual weakness associated with the roll.
Fed MBS Buying 10am & 1130am
Modestly stronger overnight. MBS look lower on charts due to the roll. 2.5 coupons are really up 3 ticks (0.09). 10yr yields down roughly 3bps at 1.464.
Sharper rally at 8:44am, not related to econ data. 10yr yields down 6bps at 1.432 and MBS up more than a quarter point now.
More short-covering ahead of the 10yr auction. Yields down 7bps to 1.422% and 2.5 UMBS up a quarter of a point.
Quick, modest weakness after Treasury auction, but bonds are holding near the day's better levels. 10yr down 6bps at 1.434 and MBS up nearly a quarter of a point.