In yet another installment of “the headline is the recap,” today’s trading session was largely uneventful apart from the moderate weakness carried over from the overnight session. (See what I did there? Same thesis as the headline, but with different words!) If that didn’t scare you away from reading the rest of this, I’ll try to find something useful to say.
If nothing else, today gave us another chance to see just how closely stock prices and bond yields are following each other. The very best look at this phenomenon began this week as the correlation was jostled somewhat significantly by last week’s NFP and more so by the Fed Announcement 2 weeks before that. The SP is right on the doorstep of the 50 day moving average–something that people who are into stocks allegedly care about. Perhaps bond markets care too. OR perhaps the “asset allocation” (by stocks, sell bonds, and vice versa) trade is a relatively more active part of the market during tax months.
The closeness of the stock/bond connection is one of the only ways to justify the complete absence of a reaction to today’s 10yr auction. The auction was pretty good, with overseas participation notably stronger. But the minutes following the auction saw some of the narrowest trading of the day.
By the close, MBS were only 5 ticks weaker, and had managed to hold above yesterday’s weakest levels throughout today’s session. Treasuries were a bit weaker by comparison, but that’s understandable with the auction cycle and a moderately large day of corporate debt issuance adding Treasury-specific pressure.