Thursday proved very forgetful for the bond market as trading levels on that day were technically weaker but exactly in line with most of Wednesday’s trading. MBS even performed slightly better, with prices eventually returning to “unchanged” levels even if yields stayed 2-3 basis points higher for 10 years. Overall, the new, lower tariff range remains. Weaker GDP data and a weaker 7-year auction couldn’t call this into question.

Economic data / events

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

  • GDP 6.5 vs 8.5 f’cast, 6.3 before

  • Unemployment claims 400k vs 380k f’cast, 424k prev

  • Pending sales -1.9 vs +0.3 f’cast, +8.3 before

Summary of the market movement

8:16 am

flat to slightly weaker overnight. EU economic data added to the weakness around 4am but we are still in the latest range. 10 years up 2.3 basis points to 1.261%. MBS less than an eighth.

8:42 am

The initial response to the data was a bit stronger, but both MBS and Treasuries have now returned to pre-data levels (as on the last update).

3:42 pm

Sideways to a little stronger all day. Modest rally at 11:00 am mainly in government bonds (chalked up to end of month and hedge flows for corporate bonds). Then more weakness in (and out of) the 7-year auction. Net effect = MBS and TSYs still in the same range that was set in the first trading hour.