After 4 straight days of heavy selling pressure, bonds finally found their footing today.  Pessimists took offense to the underwhelming size of the rally while optimists were grateful that it didn’t end up being a 5th day of selling pressure.  As for motivations, we don’t have anything massively compelling and obvious.  At this time of month/year, we can generally assume big money managers are adjusting trading positions and bond holdings as a part of the month-end index extension process as well as fiscal year-end.  Other ‘usual suspects’ include safe-haven demand dur to stock market weakness, a smaller drop in week-over-week covid cases, and of course, technicals/momentum.  Either way, we’d need to see bigger buying before talking about bonds making a case for a near-term rate ceiling.

08:42 AM

10yr yields down 3bps at 1.517 and UMBS 2.5 coupons up 6 ticks (.19) at 103-00.  High volume and generally a technically-motivated move.

09:46 AM

After some initial push back against the overnight rally, buyers resurfaced at the 9:30am NYSE open.  1.494 is the level to beat (overnight lows) and we’re currently at 1.503%.  MBS are up a quarter point.

01:15 PM

Modest weakness since 10am.  Still in positive territory, but MBS are an eighth off the highs.  10yr yields still down 1bp but up more than 3bps from the lows.  

03:59 PM

Weakness extended just a bit after the last update, but bonds have since bounced back to levels that are just slightly better (-1.7 bps in 10yr yields to 1.531%).  MBS are up an eighth on the day (2.5 coupons).