This morning’s MUCH-stronger than expected NFP hit bond markets while they were already on the back foot in terms of the February trend. It followed another “higher low” in German Bunds, which is one of the main co-indicators of Treasury weakness at the moment. Bottom line, it was big, bad news for an already vulnerable bond market and snowball selling has since run its course.
Here’s a look at some of the technical considerations. Note that today fits right in with the 2 other big selling days so far in February. Not-labeled, the white line is the 50-day moving average, which could be a target for traders looking to reload on Treasuries. In the best case, that’s potentially already happening at 1.95, which has acted as support this morning. This has recently been an important level for 10yr yields as it also provided support after the post-ECB-QE weakness in January.
MBS have felt plenty of the weakness today, with Fannie 3.0s down nearly three quarters of a point. The losses have been steady throughout the morning, resulting in widespread negative reprices.