MBS RECAP: Strong Auction Helped, but Bonds Still Got Hurt

Posted To: MBS Commentary

The sense of illiquidity was palpable today. This began in the overnight session when comments from the European Central Bank sent European bond yields screaming higher. Treasuries would typically follow--at least to some extent--but they barely budged. The problem? There weren't enough sellers in the market to force buyers to bargain shop (thus keeping prices higher and yields lower than they otherwise might have been). The imbalance changed quickly at 8:20am. That's when the a big glut of domestic bond traders begin their trading day--a fact that was readily apparent in CME's block trade screen. Several massive trades came through at 8:23am, and then again just after the Durable Goods data at 8:30am. This created enough momentum to run stops (force bond traders to sell at stop...(read more)

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