Ratio of Weakness to Confirmed Explanations is Off The Charts

Every year there are a few days where bonds move as if obviously inspired in spite of a distinct absence of obvious inspiration. Monday was one of those days.  Sure, there are a few “best guesses” making the rounds, but all of them are fairly easy to debate and none of them are worth the 11.5bp jump to the highest 10yr yields in almost 3 months.  News articles pointing out “the economy” or “the deficit” are grasping at straws.  These things are valid, but they wouldn’t adequately account for today’s sell-off.  Sometimes the explanations for these episodes become clearer in hindsight.  Other times, the mystery endures. Either way, volatility remains a big risk through mid-November. 

Econ Data / Events

Housing Starts

1.354m vs 1.350m f’cast, 1.356m prev

Building Permits

1.428m vs 1.46m f’cast, 1.47m prev

Market Movement Recap

09:08 AM Sharply weaker overnight and sideways from there.  10yr up 6bps at 4.137 and MBS down a quarter point in 5.5 coupons.

11:59 AM Snowball selling all morning.  MBS down more than 3/8ths and 10yr up 9.3bps at 4.17

03:36 PM Still at weakest levels.  MBS down 14 ticks (.44) and 10yr up 10.6bps at 4.184