Bonds have done a good job over the past 2 weeks in negotiating hurdles of varying sizes. Last week’s inflation data was the biggest risk in recent times, but this week’s Fed minutes also raised some concerns. This morning’s example was courtesy of a much stronger PMI from Markit Services, but it didn’t compare to well-anchored range trading with longer-term returns. 10-year government bonds briefly hit their daily highs, but then settled into the same sideways to slightly stronger pattern seen yesterday afternoon.

Econ data / events

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

  • Markit PMIs:
    Services 70.1 vs 64.5 f’cast
    Making 61.5 vs 60.2 f’cast

  • Existing sales 5.85 million versus 6.09 million f’cast

Market Movement Review

8:36 am

sideways to a little stronger overnight. Uneventful volume and volatility. Modest gains in Europe with a bit of spillover helping US tens start 1 basis point lower at 1.618. UMBS 2.5 by 2 ticks (0.06) at 103-15 (103.47).

10:16 am

Markits Services PMI damaged bonds and brought 10-year yields back to daily highs (+ 0.6 basis points at 1.634). No major response to slightly weaker existing home sales as this is believed to be due to an inventory crisis.

2:31 pm

The low volume / low volatility persists, with government bonds roughly unchanged and MBS only a shade stronger. Several Fed spokesmen on the circuit, but nothing special and new.