Bond Market Defensiveness Justified by Weak Auction

Coming into the domestic session, bonds were weaker without any overly compelling justifications.  Sure, we can always gather a handful of the usual suspects and paint a picture, but it would have been just as easy to do so for an unexpected AM rally.  It wasn’t until the afternoon’s 5yr Treasury auction that we had objective and substantive evidence for trader defensiveness (it was very weak, even after the AM sell-off).  This may not tell us anything too specific, but in a general sense, bonds are nervous about this week’s supply (Treasury auctions, etc).  Thursday’s inflation data is also a safe assumption.  

Econ Data / Events

Durable Goods 0.7 vs 0.1 f’cast, 0.4 prev

Pending Home Sales +0.7 vs -3.7 f’cast, -4.0 prev

Market Movement Recap

08:38 AM Gradual selling continues overnight with AM data not helping.  10yr up 7.3 bps at 3.209 and MBS down 10 ticks (.31).

11:07 AM Decent bounce, but still slightly weaker on the day.  MBS down just over an eighth of a point and 10yr up only 4.3bps at 3.181.

01:21 PM Weakness after the 5yr Treasury auction.  MBS at new lows, down roughly 3/8ths and 10yr yields back at the highs, up more than 6bps at 3.20%.  

04:02 PM Near the weakest levels at the end of the day.  MBS is a bit of a moving target due to liquidity, but generally down at least 10 ticks (.31).  10yr yields are up just under 7bps at 3.205.