There was some speculation earlier in the week that Monday’s bond rally was based on expectations of a friendly announcement from the European Central Bank (ECB) on Thursday morning, but it probably makes more sense to attribute the move to other variables (new Covid concerns). , Trading positions, momentum / technology). That also makes it possible to view today’s weakness as a kind of “pre-ECB positioning”, but that, too, is probably not ideal. In other words, we have a defensive postponement ahead of the ECB’s announcement, but not necessarily because of it.

Summary of the market movement

09:34 am

A little weaker overnight with a little pushback between 5 and 9 a.m. Sellers have grabbed these higher prices and are now pushing bonds to the weakest levels of the day / week. 10 years up 5+ bps at 1.273 and 2.0 UMBS down 6 ticks (0.19).

1:50 p.m.

The weakness peaked shortly after the 20-year bond auction at 1:00 p.m., and we’ve seen some semblance of stability since then. 10yr is up 6.6 basis points to 1.29% and 2.0 UMBS is down a quarter point to 101-18 (101.56).

3:51 pm

At this point, trading has been flat since 11 a.m., with hindsight suggesting no real reaction to the 20-year auction. MBS have since underperformed Treasuries, but only after outperforming significantly since Monday afternoon. 2.0 coupons are down almost 3/8 of a point to their daily lows: 101-15 (101.47). The 10-year yield is up 7.3 basis points to 1.293.