Half-Hearted Correction Continues

Don’t call it a correction.  Yields may have rallied 30bps in just over a week and apparently bounced almost perfectly at 4% (10yr), but they haven’t exactly done much over the past 2 days. It’s just as fair to say things are “sideways and waiting for guidance,” but the cautious approach is to respect the almost-too-obvious technical patterns in play since July. Specifically, bonds have rallied 25-30bps and then consolidated toward slightly higher levels on multiple occasions. This could be the beginning of another similar pattern, but anything is possible if data is gloomy over the next 2 days (especially Friday). Today’s data was modestly unfriendly with core durable goods at 0.6 vs 0.4 and a lackluster 20yr bond auction (not typically a market mover, but added some pressure today).

Econ Data / Events

MBA Purchase Index (Feb)/13

157.1 vs — f’cast, 161.5 prev

MBA Refi Index (Feb)/13

1375.9 vs — f’cast, 1284.6 prev

Core Durable Goods (Dec)

0.6% vs 0.4% f’cast, 0.7% prev

Durable goods (Dec)

-1.4% vs -2% f’cast, 5.3% prev

Housing starts number mm (Dec)

1.404M vs 1.33M f’cast, — prev

Housing starts number mm (Nov)

1.322M vs — f’cast, 1.246M prev

Market Movement Recap

08:33 AM Roughly unchanged overnight and no major reaction to 830am data. MBS unchanged and 10yr up half a bp at 4.064

01:21 PM Slightly weaker after 20yr auction.  10yr yields up 2.2bps at 4.082. MBS unchanged after being up 3 ticks (.09).

02:09 PM zero reaction to Fed Minutes. MBS unchanged and 10yr up 2bps at 4.081