Bonds Remain Resilient Despite Supply-Related Headwinds

Supply and Demand 101 tells us that higher supply means lower prices, all other things being equal.  The same is true for the bond market.  Supply is fairly predictable at times, but some sectors wax and wane more than others.  The corporate bond market is one such sector and it has seen supply ramp up aggressively in the past 2 weeks.  Combine that with the already known but still relevant challenge of taking down this week’s Treasury auction supply and it’s fair to say there are headwinds for bonds at the moment.  That makes today’s moderate rally more impressive, but Wednesday’s CPI data has the final say on this week’s momentum.

Econ Data / Events

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Market Movement Recap

08:57 AM Modestly stronger overnight, mostly during European session opening hours.  10yr down 2.2bps at 2.805.  MBS up 2 ticks (.06).

12:25 PM Near best levels after slow, steady gains.  MBS up a quarter point.  10yr down 6bps.

03:05 PM Modest additional gains–still slow and steady.  MBS at new highs, up 11 ticks (.34) at 99-30 (99.94).  10yr in line with previous update, down 6.2bps at 2.764.