Jobless Claims data doesn't normally move the market, but it did this morning, even if only by a bit. It was enough to turn modest losses into modest gains ahead of the afternoon's 30yr bond auction. Here too, hopes were not high for a big reaction. After all, there was no real reaction to yesterday's 10yr auction. But things were different this time as traders bid more aggressively for the longer duration. With that, we had two modest-but-noticeable rallies that left trading levels right in line with this week's range after starting out at the highest yields of the week.
Modestly weaker overnight, but back into the green after claims data. MBS unchanged. 10yr down 1bp at 4.487
12:17 PM
Steady near stronger levels. MBS up 3 ticks (.09) and 10yr down 1.2bps at 4.486
01:04 PM
Best levels of the day after 30yr bond auction. 10yr down 2.4bps at 4.472. MBS up an eighth.
04:32 PM
Sideways and strong into the close. MBS up just over an eighth and 10yd down 3.9bps at 4.458.
Lock / Float Considerations
Lower risk and lower reward now that bonds have slid into a lower consequence week. The calendar is very light and next week's CPI looms large as a huge potential win or loss (something that should keep bulls and bears from getting too excited in the meantime). Defensive clients are considering the nice rate sheet improvements over the past week and a half. Combined with the more sideways outlook, it presents a logical opportunity to circle the wagons. Risk-tolerant clients are waiting for bonds to do something more threatening before taking chips off the table.
