Big Bond Rally to Start The New Week
In spite of potential headwinds in the coming days (CPI data and Treasury auctions, specifically), bonds are off to the races so far this week. That wasn’t destined to be the case in the overnight session as 10yr Treasury yields hit new long-term highs of 3.20%, but things only improved from there. Another big drop in stocks helped fuel some safe-haven demand. Lower oil prices didn’t hurt. We can also consider that Friday’s weakness may have been more about position-squaring than a genuine impulse to sell bonds. Lastly, the abundance of short short-covering triggers and add to the bullish momentum.
Econ Data / Events
Fed MBS Buying 10am, 11:30am, 1pm
Wholesale Inventories 2.3 vs 2.3 f’cast, 2.3 prev
Market Movement Recap
09:19 AM Initially weaker overnight, but back in positive territory this morning (just barely). MBS may not look green at any given moment, but that should change when liquidity improves.
12:25 PM Big AM rally continued through 11:30 before finding resistance. 10yr down 4.7bps at 3.095 and UMBS 4.0 coupons up 11 ticks (.34) at 99-01 (99.03).
03:39 PM Bonds continue to surge with stocks at lows, oil tanking, and late day liquidity adding emphasis as more accounts are forced to cover short positions. 10yr down 11bps at 3.034 and MBS up almost half a point.