Surprisingly Strong Day Leaves Yields at Fresh Lows

Nothing good happened for the bond market today–at least not in terms of economic data coming in weaker or Fed speakers saying new and supportive things.  In fact, the economic data was biased toward strength–especially if you ask Consumer Confidence at 110.7 vs 101 previously.  Top that off with a modest miss in the 20yr bond auction and there was really and truly no great reason for bonds to improve during domestic hours.  Nonetheless, the U.S.-only trading hours saw the best gains of the day as 10s rallied under 3.85% in the afternoon.  That leaves us grasping at the same straws we set out for ourselves last week: i.e. an inconsistent year-end trading environment in which lighter volume/liquidity make for bigger-than-normal moves in response to compulsory year-end trading needs.  The ball happened to bounce our way today.  It could have gone either way.

Econ Data / Events

Existing Home Sales

3.82m vs 3.77m f’cast, 3.79m prev

Consumer Confidence

110.7 vs 104 f’cast, 101 prev

Market Movement Recap

10:05 AM Steadily stronger throughout the overnight session. Modest bounce at 9am.  MBS still up 2 ticks (.06) and 10yr down 3.3bps at 3.898

10:32 AM More modest losses after stronger consumer confidence.  10yr still down 2.6bps at 3.905, but at highs of the day.  MBS still up 3 ticks (.09) but at lows of the day.

04:14 PM modest weakness giving way to moderate strength in the PM hours despite weaker Treasury auction.  10yr down 7.4bps at 3.857.  MBS up 5 ticks (.16).