There were three distinct waves of volume in Treasury futures this morning. The first brought minor weakness as the domestic session got underway resulting in a test of high yields at 1.6557.
The second wave arrived in concert with the 9:30am stock market open. Stock futures had already fallen plenty from the loftier midnight levels (mid 1340’s to mid 1330’s), but at least another 10 point slide began at the 9:30am open, helping 10yr yields fall further, and MBS prices break into the green.
The third wave looks to be have been an expedition to determine support levels for stocks and resistance levels for bonds. It began with another mini volume surge and more “risk-off” movements (10yr yields and stock prices lower, MBS prices higher), but put in a distinct bounce at 1.591 in 10yr yields and 105-03 in Fannie 3.5’s. The SP experienced it at 1320 (after opening at 1335).
Everything since then has just been casually drifting back in the other direction, looking anything but frantic or volatile at the moment. In fact, the extent to which the movement has been “in the other direction” is already looking questionable. We’d probably lean toward classifying the current price action as “sideways, just slightly off highs.”