Treasury yields moved steadily into the important gap between 2.26 and 2.28 this morning and had been holding their ground just under 2.28 for nearly an hour until breaking higher just after 11:45am. The technical follow-through has been moderately bad, but disappointingly steady. 2.296 had been a potential turning point, but a weaker-than-expected 30yr TIPS auction just provided an additional measure of weakness, bringing yields up to 2.30.
MBS continue to hold up better than Treasuries during the selling trend, but that’s little consolation when prices are down between 3/8ths and 1/2th a point.
Also unfortunate this morning is that we’ve seen a reversal in the recent trend of Treasuries holding firmer in the face of rising stock prices. Today it’s Treasury yields that are outpacing gains in equities. Case in point, stocks have gone no higher than their 11:15am levels, but Treasuries merely paused before resuming the selling.
While this weakness is a bit more than we would have been comfortable with in any supportive scenario, it’s still not as abrupt as it might have been in a more bearish scenario. Translation: today sucks, but all hope is not necessarily lost.