Monday ended up being rather uneventful for the bond despite its role as the lead-off hitter for an all-star line-up. There were no significant economic reports on tap, but the 3yr Treasury auction managed to come in weak enough to prompt a bit of additional selling. Losses were short-lived and trading levels returned to pre-auction levels about 90 minutes later. That left a sideways-to-modestly-weaker tone intact for the day as traders wait for ultra-high consequence data and events on Wednesday.
modestly weaker overnight and little-changed since then. MBS down 3 ticks (.09) and 10yr up 1.5bps at 4.476
01:40 PM
a bit weaker after 3yr Treasury auction. 10yr up 2.8bps in total on the day at 4.489. MBS are down an eighth of a point in 6.0 coupons
03:20 PM
Recovering some of the post-auction weakness now. MBS down 3 ticks (.09) and 10yr up 1.9bps at 4.48
Lock / Float Considerations
As feared, the bond market was not completely impervious to strong economic data, as seen after Friday's jobs report. With Treasury auctions on a condensed schedule this week and significant event risk from CPI and the Fed, we'd operate on the assumption that the risk-aversion pendulum will swing the other way until we get through Wednesday. In other words, both risk-tolerant and risk-averse clients would be lock biased right now. Floating is for moon shooters only (glorious when it pays off, but not a high probability shot).