Strong Start and Strong Reversal Ahead of ECB
European markets led bonds well into stronger territory overnight. Lighter volume/liquidity conditions made Treasuries all the more impressionable. US traders added briefly to the gains at the 8:20am CME open before embarking on a linear sell-off culminating in modestly weaker levels. A well-received 20yr bond auction helped stop the bleeding, but just barely. All of the above can also be broadly thought of as the bond market jockeying for position ahead of tomorrow morning’s European Central Bank (ECB) announcement.
Moderately stronger overnight with Europe leading the way. Nice follow through at 8:20am ET initially, but pulling back just a bit now. 10yr down 6.5bps at 2.963. MBS up just over an eighth of a point.
MBS fall back to unchanged levels and Treasuries give back most of the gains. Stocks surging back into the green and EU bonds selling. More of a linear move for Treasuries, starting at the 8:30am low yields.
Selling continued into the 1pm 20yr auction. Strong results caused a brief, shallow bounce. Back near weakest levels now with 10yr roughly unchanged at 3.03 and MBS down an eighth on the day.