To be fair to the notion of volatility, what we saw overnight wasn’t much at all compared to events like Nonfarm Payrolls or FOMC data, but it was the first time in the past 2 weeks where we see clearly delineated movement and volume that’s clearly tied to a specific European event in the overnight session.
Treasuries began flat in Asian hours and moved quickly lower in yield after the Bank of England came out with their own version of tying rates to unemployment in their official policy statement, FOMC Style. The positivity was wholly undone–and then some–by a ridiculously stronger-than-expected Industrial Production number in Germany.
All that might sound a tad dramatic, and indeed it might have been for European markets (UK 10’s moved down 5+ bps on the BOE news and up 8bps on the Germany news), but for US Treasuries, it amounted to no more than a 3bp rally and retreat.
Even though core European debt remained at higher yields as we crossed into the domestic session, US bond markets headed back to stronger levels. Treasuries and MBS opened in slightly better shape with Fannie 3.5s up 4 ticks at 100-23 and Fannie 4.0s up 4 at 103-29. 10’s are currently down 2 bps at 2.6214.
The only moderately significant economic event arrives at 1pm with the 10yr Treasury Note Auction.