It was a quintessential summertime Monday to start the new week. Trading volumes were exceptionally light and volatility wasn't far behind. Most of the movement happened right at the 8:20am CME open with Treasuries quickly repairing some incidental overnight damage. The 9:30am NYSE open saw a quick pop and drop, but from there, it was super sideways for Treasuries and especially MBS. Both ended the day in effectively unchanged territory vs Friday. Uneventful days become less likely from here on out due to Treasury auctions, Powell Testimony, but most importantly, Thursday's CPI data.
Initially weaker overnight, but bouncing back in early domestic trading. MBS up 2 ticks (.06) and 10yr down 0.4bps at 4.277
11:58 AM
Off the best levels slightly. MBS now unchanged and 10yr up half a bp at 4.287
03:27 PM
Very sideways with MBS up 1 tick (0.03) and 10yr down almost 1bp at 4.273
Lock / Float Considerations
Friday's jobs report was a win for the bigger picture rate trend, but more in the sense that it helped defuse concerns about inexplicable labor market strength in a restrictive monetary environment. It leaves a very blank canvas for CPI data to set the tone in the coming week. Data dependence is the only certainty as far as directionality. In other words, lock/float is a coin toss that waits for big economic reports to call heads/tails. All we can tell you is that CPI is a high stakes coin. Between now and then, risk averse clients might consider the tendency for Treasury auction weeks to get off to a rockier start.
