To be clear, there is no breaking news or economic data driving the trade in bond markets at the moment. There’s not really anything significant about yesterday’s news or events that inspired current levels. Current levels are a result of snowball of selling. Such snowballs take on lives of their own once they gain certain mass and that’s exactly what we’re seeing here.
10yr yields came within 0.03 of touching their 200 day moving average at 2.25% and currently trade at 2.23. Fannie 3.5’s are down 16 ticks on the day now at 102-14. At this point, today’s losses are surpassing yesterday’s in scale.
Support levels are much less clearly defined and have nothing by way of recent precedent to inform them in this range, but 2.25 at the 200-day moving average and 2.27, an old pivot from August and October have some potential significance. 2.136 is a resistance floor now.
If you had pricing before 10am, reprices for the worse are already a risk, although you might give things a few minutes to bounce back, and potentially hold off if we’re at 102-16 or higher in Fannie 3.5’s.
We suspect that any inclination to bounce back will get more support after today’s 30yr Bond Auction if it’s well-received in the slightest, but bear in mind that “bounces back” are more about damage control than about reversing the snowball. It won’t roll uphill.