Decent Day, But There’s a Catch
Bonds improved today! The rally was moderate by typical standards, but it feels like a huge victory in light of the 2yr highs in rates seen yesterday. It’s not very different from last week’s resilience. At the time, we were concerned that it could be a trap (or at least cognizant of the possibility). This time around, the same reminders are in order. It’s pretty much that simple until and unless we see a much bigger push toward lower yields/rates. Even then, we need to see how bonds are doing after next week’s Fed announcement before considering any tweaks to the early 2022 rising rate narrative.
Econ Data / Events
Fed MBS Buying 10am, 11:30am, 1pm
Housing Starts…….1.702m vs 1.65m f’cast, 1.678m prev Building Permits ….1.873m vs 1.701m f’cast, 1.717m prev
Market Movement Recap
08:28 AM Flat to slightly weaker overnight with pressure from Europe at 2am. A bit of a recovery since then with better buying at 8am. 10yr yield half a bp lower at 1.87 and 3.0 UMBS up 6 ticks (.19).
10:02 AM Resilience/gains continue with 10yr down 2.5bps at 1.85–the lows of the day. UMBS 3.0 coupons are up nearly 3/8ths of a point.
01:08 PM Modest additional gains after strong 20yr bond auction. 10yr down more than 4bps at 1.832 and MBS up more than 3/8ths of a point.
03:10 PM Similar levels to last update at the 3pm close. The day has been a gradual rally from the outset with gains plateauing in the the PM hours.