Bonds were introduced into the national session with surprisingly rapid gains amid a relative lack of justification. We talked about this more in the AM commentary. The key event since then has been much easier to identify. Yields clearly rose ahead of the 1pm 10-year Treasury auction, and immediately adjusted lower after the good results. If it was not enough to bring us back to the best levels of the day, the simple fact of keeping a gain of 4-5bp on the day is a big victory in technical terms. MBS has not done as well but has been close to its best for months nonetheless.

Summary of market movements

09:11

Stronger overnight with Europe. More technical triggers and short cover snowballs in the treasures. 10 years down 5 basis points to 1.49%. MBS is lagging a bit behind, with 2.0 coupons up 6 ticks (0.19).

10h53

The NYSE opening at 9:30 a.m. brought additional positive momentum to the bond market, but it may have resulted in levels strong enough to prompt profit-taking and / or further short positions. Yields were as low as 1.472 and are now at 1.496. UMBS 2.0 coupons rebounded an eighth of a point lower.

13:08

sigh of relief after the strong auction. The 10yr was approaching 1.51 and is now back around 1.49. UMBS 2.0 coupons have improved by several ticks over the past 8 minutes, now almost a quarter point higher on the day at 101-11 (101.34).

3:11 p.m.

The 10 broke the 15 hour mark down 5 basis points to 1.487 – a very solid performance and essentially in line with the May 7 lows. So much the better and we would be back to March 4th levels. MBS have been on the side since the last update (just under a quarter point more on the day in 2.0 coupons).