New Week, New Sense of Urgency
The new week wasted no time in differentiating itself from the previous week as bonds sold off somewhat briskly this morning. This was a known risk given the motivation for the recent gains. Specifically, short-covering rallies leave themselves open to these little reversals. The bigger question of "where do we go from here" may depend on the incoming data and especially Wednesday afternoon's Fed announcement/forecasts. Despite the early selling pressure, bonds offered some reassurance in the afternoon by holding calmly under 1.50%.
Fed MBS Buying 10am, 1130am, 1pm
Consumer Sentiment 86.4 vs 84 f'cast
1yr Inflation expectations down 0.6%
5yr Inflation expectations down 0.2%
Roughly unchanged overnight, then slightly weaker after the 8:20am CME open. 10yr yields less than 2bps higher at 1.47%. UMBS 2.0 down an eighth.
1.47% gave way to a classic mini-snowball selling spree. Yields are quickly up to 1.49% and 2.0 UMBS are down a quarter point.
A bit more negative momentum as Treasuries continue to drift weaker following the technical break of 1.47. MBS down more than a quarter of a point.
It's been a reassuring couple of hours as yields hold calmly under 1.50%. MBS are off their lows as well, even if only slightly. No rhyme or reason to the gains apart from the morning's selling having run its course.