This is getting old... and unfortunately, more prevalent. The bond market has been offering up more and more examples of reasonably brisk changes in yields without any obvious catalysts. This forces market watchers to concoct narratives to fit the price action (i.e. to say things that wouldn't be said if the mystery move was a rally). In other words, guesses and generalizations are the name of the game. What we do know is that a broad rotation out of bonds and into stocks is underway, even if stocks weren't a good example of that today. We know there were some headlines regarding potential Korea/Japan trade deals in the works. And we know the bond market isn't thrilled with the potential Treasury issuance implications associated with congressional budget headlines. All that having been said, the reality is probably significantly more complicated and boring than this small collection of usual suspects.
Modestly weaker overnight and a bit weaker so far. MBS down almost an eighth and 10yr up 2bps at 4.49
12:29 PM
More weakness. MBS down just over a quarter point and 10yr up 5bps at 4.519
02:26 PM
Flat at weakest levels. MBS down 9 ticks (.28) and 10yr up 5.3bps at 4.522
03:11 PM
Weaker at the 3pm CME close. MBS down 11 ticks (.34) and 10yr up 6.5bps at 4.534
Lock / Float Considerations
Bonds/rates find themselves in the unpleasant position of not knowing where their next big impetus for improvement will come from. While it's true that rates can fall despite an obvious catalyst, this is nonetheless not a float-friendly environment. The only foreseeable exceptions would be for seriously weak economic data and another big dip in stocks.
