We closed last week with a fence over the near-term outlook for interest rates. On the one hand, Friday was pretty weak. On the flip side, that weakness followed three big days of gains and could further be streamlined as a defensive position ahead of early risk in the week ahead. We got through half of those risks on Monday (3- and 10-year Treasury auctions) with minimal damage, but certainly without big profits. Hence, bonds look like they are keeping their options open for now. We hope to get the country better off after tomorrow’s events (CPI and 30 year bond auction).

Summary of the market movement

8:41 am

A little stronger overnight, mainly thanks to kind comments from Lagarde at the ECB. 10 years down almost 2 basis points at 1.344 and UMBS 2.0 by almost an eighth at 101.5

10:28 am

Winnings cleared. Not an open market mover aside from the general shift after the NYSE opened at 9:30 a.m. 2.0 UMBS now 1 tick (0.03) weaker per day and 10-year return now unchanged.

11:46 am

Additional weakness after a 3-year Treasury auction. 10yr is now up 1.4 bps to 1.375 and MBS is down almost an eighth.

1:03 p.m.

No additional damage after 10 year auction (mixed results but not bad). Only slightly down 10 years since the auction, but still 1 basis point higher on the day at 1.37%. UMBS 20 by 2 ticks (0.06) a day.

3:19 pm

Post-auction strength lost at the 1.36% level (earlier the upper limit today, but now a lower limit). Slightly weaker after 15:00 CME close, now up 1 basis point to 1.37%. With unchanged 2.0 coupons, MBS is still far from lows.