Intraday Weakness vs Bigger Picture Strength
There comes a time in the midst of an aggressive snowball rally (or sell-off) in the bond market where we're forced to consider the mortality of the short term trend. As 10yr yields jumped up almost 10bps in a few short hours, today was that day for the current move. Context is important though, and the weakness left Treasuries only slightly worse off than yesterday's close (MBS are still slightly stronger with a few hours to go). Considering yesterday's closing levels represented an immense rally from the previous week, it's hard to say which side is making the more compelling point. Bottom line, there's certainly reason for caution, but not necessarily strict orders to abandon hope.
Fed MBS Buying 10am, 1130am, 1pm
Housing Starts 1.643m vs 1.590m f'cast, 1.546m prev
Building Permits 1.598m vs 1.70m f'cast, 1.683m prev
Philly Fed Services Index 53.1 vs 59.6 prev
Roughly unchanged overnight, despite some 2-way volatility. Better buying since the start of the domestic session with several instances of bigger buying shortly after the 8:30am data. 10yr down 5bps at 1.149% and UMBS 2.0 up almost a quarter point at 102-01 (102.03).
Fairly sharp reversal which started slowly at the 9:30am NYSE open, but picked up steam after 10:40am. 10yr is now 'unchanged' on the day at 1.199 and UMBS 2.0 coupons, though still slightly positive, are a quarter point lower from intraday highs.
After some additional weakness, bonds seem to have found their footing in the PM hours. 10yr is almost back down to 'unchanged' and MBS are back in line with levels from the last update (up slightly on the day, but down a quarter point from highs).