If it's the last day of a month and especially if it's also the last day of the quarter, and if bonds are making a move in the second half of the day for no other apparent reason, the default scapegoat is month/quarter-end positioning. Month-end trading can take a variety of forms ranging from broad asset-allocation trades between stocks and bonds to specific buying/selling of Treasuries to achieve various portfolio goals. This can be as simple as certain accounts no longer needing to hold as many Treasuries after the 3pm marking period. Either way, the selling wasn't extreme, by any means, but it was enough to erase the gains facilitated by this morning's weaker econ data.
Modestly stronger overnight and some additional buying after data. MBS up 3 ticks (.09) and 10yr down 2.7bps at 4.112
11:45 AM
giving up some gains now. MBS up 1 tick (.03) on the day and 10yr nearly unchanged at 4.139
02:00 PM
weakest levels of the day for MBS, now unchanged and down an eighth from highs. 10yr down half a bp at 4.134
03:26 PM
new lows for MBS, down 6 ticks (.19) from the highs and 2 ticks (.06) on the day. 10yr yields are up 1bp at 4.149
Lock / Float Considerations
Bonds are starting the new week without much conviction. The tone of the data should guide the next major move. Risk/reward will increase sharply on Thursday night if a stop-gap bill is in place that allows for the release of the jobs report on Friday.
