Strong Data, Weak Auction, Weak Bonds
Wed, Jan 24 2024, 4:18 PM
The simplest way to view today’s moderate bond market weakness is as a pure and logical reaction to the fundamental market movers. 9:45am brought stronger economic data as well as some unfriendly headlines from the Bank of Canada (BOC). That was enough to undo a bit of overnight strength. Then at 1pm, an unequivocally bad 5yr Treasury auction did the rest of the damage. In the bigger picture, bonds are favoring a trend toward higher yields in January. Some would suggest this is defensive positioning for the Fed and next week’s data.
- S&P Global PMIs
- Manufacturing 50.3 vs 47.9 f’cast, 47.9 prev
- Services 52.9 vs 51.0 f’cast, 51.4 prev
- S&P Global PMIs
09:54 AM
Weaker after data. 10yr down 1bp on the day at 4.122. MBS down 1 tick (.03).
11:43 AM
5.5 coupons are now down 3 ticks (.09) on the day but well over a quarter point from the AM highs. 10yr yield are up 1.5bps to 4.147.
01:26 PM
additional weakness after 5yr auction. 10yr up 4bps at 4.172. MBS down 5 ticks (.16).
04:06 PM
New lows at the close with MBS down 6-7 ticks (.19-.22) and 10yr yields up 5bps to 4.18+.
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