Bonds were moderately to severely weaker overnight and continued to deteriorate in the afternoon. Given the surge to 1.25% of 10-year returns the day before, you can rightly be concerned about a bigger bounce. However, the bond market also has the right to sell 6bps in Treasuries and 3/8 of a point in MBS on Friday before having to buy $ 120 billion in bonds in the first 2 days of the year and digest a new CPI the following Week. In other words, we may not get a good response to major bounces or breaks before the weekend until next Wednesday.

Summary of the market movement

8:28 am

Weaker overnight in a fairly linear movement that started right at the opening and continued through the European hours. 10yr is up 4bps to 1.336 and 2.0 UMBS is down almost a quarter point.

11:34 a.m.

Quite calm so far despite some additional weakness in Treasuries (10 years holding at the technical level of 1.35%). MBS have been flat since 8:30 AM, never more than a tick (0.03) from those levels (minus 0.22).

1:10 p.m.

Weakness accelerates after breaking the 1.35% cap for 10 seconds (now 1.36%). MBS at 10 ticks (0.31) a day and an eighth point from the AM plateau. No obvious causes. Leakage Friday afternoon only.