Bonds Open to Suggestion Ahead of Inflation Data
After selling off fairly swiftly for most of last week, bonds started out moderately stronger today and ultimately recovered most of last Friday’s losses. Gains were initially driven by strength in the EU bond market, but more than half the improvement showed up during domestic hours. There was little by way of overt provocation, but weaker equities played a part, as did curve flattening trades (now “curve inversion” trades with 2 yr yields at 3.07 vs 10yr yields at 2.99). Today’s strength serves as a reminder that yields need not necessarily fly right up to previous highs, but instead are likely open to the suggestions made by tomorrow’s 10yr auction and especially Wednesday’s CPI data.
Econ Data / Events
no significant economic events
Market Movement Recap
09:26 AM Stronger overnight, largely following EU bond rally. Gains extending early as stocks sell. 10yr down 7bps at 3.01 and 4.5 UMBS up just over a quarter point.
12:14 PM Slightly stronger into the noon hour with 10s down 10bps at 2.982 and 4.5 UMBS up 10 ticks (.31).
01:30 PM Yields seem to have bottomed out with EU yields just before the noon hour. They’ve moved slightly higher since then, but 10s are still down 7.5bps at 3.004. MBS are still up just over a quarter point, but off the highs by a few ticks.
04:05 PM Some 2-way volatility heading into the 4pm NYSE close. MBS were briefly a quarter point off the highs but are now off only an eighth of a point. 10yr back down to 2.985 after being as high as 3.005 this afternoon.