Bond markets began the overnight session with a “risk-on” move
during Asian hours as both Treasury yields and equities futures moved
back towards Monday morning levels. 10’s never went over 1.99 though,
and began easing gently lower into domestic hours, helped along by a bit
of a “risk-off” move during European hours.
This got MBS and Treasuries in the door just barely in the green and
though we slipped back briefly into the red, the weakness was
short-lived. That said, there hasn’t been a triumphant romp back into
stronger territory either… Fannie 3.0s are up 2 ticks at 103-16 and
10yr yields down half a bp at 1.9696.
Consumer Confidence was much weaker-than-expected, but has had minimal
impact outside some volatility in equities. Perhaps markets are willing
to discount the data as greatly affected by payroll tax changes (this
is suggested in the report itself).
Whatever the case, it’s disconcerting to see trading levels shy away
from resistance levels so far this morning as they mark noticeable pivot
points with Friday’s weakest levels (MBS were a bit weaker on Friday
afternoon, but they had wilted quite a bit vs TSYs into the weekend, and
there was a prominent low at 103-18 in the morning, now today’s high).
So we’ll keep a close eye on these pivot points (103-18 in MBS and 1.95
in 10yr yields for the rest of the session. Scheduled Fed QE4 buying is
going on at the moment and the 5yr Auction results hit at 1pm. The
green is good, but the absence of a break through the aforementioned
resistance levels is a bit ominous so far. Stay on guard.