Today’s trading session was far less eventful than anything else seen in the past few weeks, both in terms of movement and volume. Although Treasury yields were higher, most of the increase came in the overnight session, and additional volatility was minimal throughout the day.
By the time we get to MBS (as opposed to Treasuries), things were even more calm. Fannie 4.0 coupons were almost perfectly unchanged compared to 10yr Treasuries which lost more than a quarter of a point in price.
At least some of the pressure may have been due to the fact that it’s a 3/10/30yr auction week with today being 10’s. It’s not uncommon for bonds to lose a bit of ground heading into auctions Today was no exception with most of the losses coming BEFORE the somewhat weak 10yr auction.
The morning’s economic data was also a non-event with CPI coming in right on the screws.
In the bigger picture, we’re in the midst of a consolidation following the recently strong rally and the Fed Announcement coming up next Wednesday. Bonds may or may not take a ‘lead-off’ ahead of the Fed, but for the most part, that’s the event most likely to dictate the next wave of momentum.