Even though very little changed during the course of the trading day, one potentially important thing happened. Rather than start weaker and continue to lose ground throughout the session, bonds managed to stop the bleeding early and then push back toward unchanged levels by the end of the day. This is the kind of thing typically seen when a corrective trend is running out of steam in the short term. While this doesn't make the bond market immune from another motivation to sell, it suggests that the market is now open to suggestion from either bulls or bears, and that's an upgrade from the selling bias seen on Monday.
Moderately weaker overnight with some additional selling early. MBS down an eighth and 10yr up 3.8bps at 4.419
01:36 PM
sideways all day. MBS still down an eighth and 10yr up 2.1bps at 3.877
03:33 PM
Very slight recovery, but very low volatility. MBS down 3 ticks (.09) and 10yr up 1.3bps at 3.869
Lock / Float Considerations
Follow-through is always a risk when a strong jobs report pushes back against a prevailing rally trend. That's what we saw at the start of the new week, but not in any extreme sense. Bonds are behaving fairly logically here. Unfortunately, there's not much on the calendar to fuel additional logical cause/effect. Bigger risks await with next week's data. The present week is more of a placeholder. The recent end of a rally trend would have us feeling a bit more defensive until this correction has clearly run its course.
