The overarching caveat for any assessment of today’s market activity is that the whole thing occurred in a relatively tight range. Sustained highs and lows were in a 4/32nds range in MBS and just over 2bps in 10yr yields. There was little, if any reaction to this morning’s economic data or the 2-yr Treasury auction. The biggest movement of the day was completely disconnected from anything overtly observable, including the stock lever.
Earlier this morning, it looked as though bonds and stocks might try to reconnect as selling pressure in bonds after 9am gave way to a stronger open for stocks. We were later forced to abandon that consideration as bonds rallied moderately into the noon hour despite an ongoing advance in stocks. The bond market action began looking more like the serendipitous ebbs and flows associated with corporate bond market hedging (sellers of corporate bonds using Treasuries to hedge their debt offerings. If it’s confusing–and it should be–this old article on the Verizon deal explains more).
Bond markets ended the day edging just barely into positive territory. This was more true for MBS than Treasuries, which only managed to turn green in 10 and 30yr maturities.