MBS RECAP: Uneventful Day as Bonds Level Off for Year-End

Posted To: MBS Commentary

The overnight session was much less interesting for Treasuries today (compared to yesterday). In the sense that European bonds weren't pushing yields higher, it was a much better set-up for the day. But in the sense that Treasuries weren't responding to a moderate rally in European bonds or declines in oil prices, it was also a bit ominous . Bonds maintained their sideways tack despite supportive performances in other markets (falling stocks and oil prices). This was ostensibly due to anxiety over the afternoon's 7yr Treasury auction . The results and subsequent trading corroborate the 'anxiety' thesis. Despite an exceptionally weak auction, bonds actually rallied modestly, but noticeably in the last 4 hours of the trading day. The net effect was a 1.5bp gain in 10yr yields...(read more)

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