Leading-Off And Pulling-Back Ahead of Fed

Bonds began the day in stronger territory thanks to another overnight rally led by Europe.  Domestic traders kept piling in until everything reversed course at the 9:30am NYSE open–a testament to the role of bond-related ETF trading among other things.  Technicals were also in play as the 2.71% floor was tested in the 10yr.  Yields backed up until the 5yr auction and mostly leveled off after that.  The total round trip in 10s was roughly 10bps (2.71 lows to 2.81 highs).

Econ Data / Events

– Case Shiller Home Prices ….20.5% vs 21.2% prev – FHFA Home Prices…………. 18.3% vs 18.9% prev

Consumer Confidence 95.7 vs 97.2 f’cast, 98.4 prev

New Home Sales 590k vs 660 f’cast, 642k prev

Market Movement Recap

09:33 AM Nice overnight rally on European bond gains (economic/recession concerns underpinned).  Domestic traders picking up the ball and running with it to 2.71% technical level, down 10bps.  MBS up a quarter point.

10:31 AM MBS an eighth of a point off highs, but still up nearly an eighth on the day.  10yr bounced at 2.71% technical level, now at 2.747 but still down 6bps on the day.

01:02 PM Sell-off continued heading into 5yr Treasury auction.  MBS down almost an eighth on the day and 10yr only down 2.7bps at 2.78 (up from 2.71% lows).

03:18 PM Additional weakness after the 3pm CME close.  MBS at new lows, roughly 6 ticks lower (.19), and 10yr yields are up to ‘unchanged’ levels at 2.803.