Treasury Auction Blamed as Bond Vigilantes’ Smoking Gun

Vigilante justice!  Taking matters into one’s own hands!  It’s a sensational concept when applied to the bond market, but the term hasn’t really done us many favors over the years.  It happened to work for a headline today because the term is as over-the-top as the notion that today’s 20yr auction was some magical “ah ha” moment leading to a massive reprimand of congressional budget negotiations in both stocks and bonds. In actuality, the auction was fairly average–certainly nothing that warranted the stock/bond swoon, but if markets were looking for an excuse to sell (a smoking gun?), it was one of the only options. 

Market Movement Recap

09:21 AM weaker overnight amid ongoing budget battle. MBS down just over a quarter point and 10yr up 5.3bps at 4.541

01:04 PM A bit weaker after 20yr auction.  10yr up 6.5bps at 4.553 and MBS down nearly 3/8ths.

02:37 PM Additional selling in both stocks and bonds.  MBS down half a point and 10yr up 9.4bps at 4.582.  Weakness looks to have stabilized for now though.