Bonds Firing on All Cylinders After Data and Treasury Supply

The bond market was in flow state on Tuesday with decent overnight gains, steady buying after economic data, a strong 7-yr auction despite the rally, and additional buying after the 7-yr auction. It was as if every cue was a green light for buyers. This can be rationalized as a combination of decently friendly data and Treasury supply timing. Yesterday’s auctions didn’t benefit from the updated Treasury borrowing estimates.  Also, those buyers weren’t sure how today’s auctions would go. By the time we got to today’s 7-yr, we knew what the quarterly refunding announcement looked like, all the other auctions were out of the way, data was reasonably helpful, and we suspect some early month-end buyers thought the time was right to get what they needed for Thursday. Perfect little storm? Sure, why not? Continuation likely requires more friendly data tomorrow.  Bonds won’t want to take too big a lead-off ahead of NFP Friday without serious justification. 

Econ Data / Events

Wholesale Inventories (m/m)

0.2 vs -0.1 f’cast, -0.3 prev

Case Shiller Home Prices (y/y)

2.8 vs 3.0 f’cast, 3.4 prev

Case Shiller 20-City (m/m)

0.4 vs 0.8 prev

FHFA Home Prices (m/m)

-0.2 vs -0.1 f’cast, -0.3 prev

FHFA Home Prices (y/y)

2.8 vs 3.2 prev

Consumer Confidence

97.2 vs 95.8 f’cast, 95.2 prev

Job Quits (lower is better)

3.142m vs 3.27m prev

Job Openings (lower is better for rates)

7.437m vs 7.55m f’cast, 7.712m prev

Market Movement Recap

09:55 AM modestly stronger overnight with additional gains at 930am NYSE open.  MBS up 3 ticks (.09).  10yr down 3.9bps at 4.374

11:14 AM stronger after data.  MBS up 6 ticks (.19) and 10yr down 6.2bps at 4.351

01:07 PM Additional gains after 7yr auction.  MBS up 10 ticks (.31) and 10yr down 8.2bps at 4.331

03:41 PM heading out at best levels. MBS up 11 ticks (.34) and 10yr down 9bps at 4.323