Bond markets traded an “inside day” today, meaning that the entirety of today’s trading ranges in MBS and Treasuries fell “inside” the highs and lows set by yesterday’s range. This isn’t immediately apparent on the Treasury charts because yesterday’s lowest levels occurred during the overnight session.
Back to the point though: this is what markets do when they’re circling the wagons to attend to bigger business ahead. That’s not too much of a stretch to believe considering there wasn’t much on the calendar today compared to the relatively more important events arriving over the next 3 days.
Initial overnight strength came courtesy of downgraded European growth forecasts, but tradeflows shifted negatively for a few hours in the morning. This wasn’t enough to go any material damage and lenders even managed to avoid negative reprices. Bonds bounced back toward the day’s best levels, conservatively shied away from breaking them and languished sideways to slightly weaker into the close (but not weak enough to move into negative territory. Bottom line: we ended up essentially unchanged and right in line with the long term inflection point in 10yr yields in the mid 2.3’s.