MBS RECAP: Bonds look past a weaker Treasury auction
The auction of government bonds has been more important than normal in 2021 so far as it gives traders good opportunities to vote on the pace of rising interest rates. Most recently, they were a litmus test for breaking the uptrend. While we can’t really expect strong support for a massive rally in bonds, just staying below certain caps is victory enough. Today’s relatively calm reaction to a fairly weak 10 year auction continues the recent tradition that bonds DO NOT freak out every chance they get.
Market Movement Review
Bonds were flat overnight, with gains in Asia and weakness in Europe. This weakness has continued slowly and steadily at the beginning of the domestic session. 10 year yields are now up 1.4 basis points at 1.676 and 2.5 UMBS are down 3 ticks (0.09). Waiting for treasury auctions.
Little changed from previous levels after modest initial weakness. 10 years was sideways, trading around 1.3 basis points around 1.675. UMBS 2.5 coupons by 2 ticks (-0.06) at 103-05 (103.16).
Treasury auction somewhat weaker, but no significant negative reactions on the bond market. Still at the same level as the last update.
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