Given the recent adherence to a sideways range in bond markets combined with today’s economic data coming in stronger than expected, it’s not surprising to see yields moving from a lower rung on the range-bound ladder to the next rung higher. This move was already a consideration yesterday as 10yr yields lifted off from the 2.60 resistance level. The next rung on the technical ladder is 2.68, which is where we’re currently trading.
Weakness was delivered in 3 installments this morning. The first came just before the open as overnight trading turned negative in the 7am hour. The stronger-than-expected Jobless Claims added insult to injury, beating expectations by 11k (304k vs 315k forecast). Bonds recovered somewhat only to get hit again by stronger Philly Fed data.
MBS had fallen enough in the 10am hour to suggest negative reprice risk, and at least one has already been reported. The possibility remains as prices are only lower since then.