The new week wasted no time differentiating itself from the previous week as bonds were sold somewhat briskly this morning. Given the motivation behind the recent wins, this was a known risk. Short covering rallies, in particular, remain open to these small reversals. The bigger question of “where are we going from here” may depend on the data we receive and, in particular, the Fed’s announcement / forecast on Wednesday afternoon. Despite the early selling pressure, bonds offered some relief in the afternoon by quietly holding below 1.50%.

Economic data / events

  • Fed MBS purchases 10 a.m., 11:30 a.m., 1 p.m.

  • Consumer sentiment 86.4 vs 84 f’cast
    1 year inflation expectations decreased by 0.6%
    5-year inflation expectations down 0.2%

Summary of the market movement

9:22 am

About unchanged overnight, then a little weaker after the 8:20 am CME Open. 10 year returns at 1.47% less than 2 basis points higher. UMBS 2.0 loses an eighth.

9:54 am

1.47% gave way to a classic mini snowball sales frenzy. Yields are rising quickly to 1.49% and 2.0 UMBS are down a quarter point.

12:59 p.m.

Slightly more negative momentum as Treasuries continue to trend weaker after the technical break at 1.47. MBS down more than a quarter point.

4:17 pm

It’s been a calming couple of hours as returns calmly stayed below 1.50%. MBS are also off their lows, albeit marginally. No rhyme or reason for the profits aside from the fact that the morning sales got under way.