Bonds stormed the domestic session and made surprisingly quick gains, although it was relatively unjustified. We talked more about this in the AM commentary. The key event has since become much easier to identify. Yields rose significantly in anticipation of the 10-year Treasury auction at 1 p.m. and were immediately revised down after the strong results. While it wasn’t enough to get back to the day’s best readings, technically holding a 4-5bp profit that day is a big win. MBS didn’t do quite as well, but is still close to its best level in months.

Summary of the market movement

9:11 am

Stronger with Europe overnight. More technical triggers and short-circuiting snowballs in Treasuries. 10 years down another 5 basis points at 1.49%. MBS lags a little behind, with 2.0 coupons by 6 ticks (0.19).

10:53 a.m.

The NYSE’s 9:30 am open added some positive momentum to the bond markets but could have resulted in strong levels to trigger profit taking and / or new short positions. The returns were as low as 1.472 and now stand at 1.496. UMBS 2.0 coupons bounced off an eighth point lower.

1:08 pm

Breathe a sigh of relief after the strong auction. 10 years approached 1.51 and is now back at 1.49. The UMBS 2.0 coupons have improved by several ticks in the last 8 minutes and are now almost a quarter point higher during the day at 101-11 (101.34).

3:11 pm

Ten’s crossed the 3pm mark by 5bps at 1.487 – a very strong reading and essentially in line with the May 7th lows. If it’s better, we’d be back to the March 4th levels. MBS has been moving sideways since the last update (almost a quarter point higher during the day in 2.0 coupons).