After more than 2 months of a narrow sideways range and more than 3 weeks of an increasingly narrow trading range, bond yields finally broke out today.  Is this the start of a new trend toward higher rates or just an incidental byproduct of a few key events?  The answers are “probably not” and “probably” in that order, but the details matter.

Econ Data / Events

  • 20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th)

  • ADP Employment 749k vs 650k f’cast, 481k prev

  • Q2 GDP (final) -31.4 vs -31.7 prev

  • Chicago PMI 62.4 vs 52.0 f’cast, 51.2 prev

  • Pending Home Sales +8.8% vs +3.4 f’cast, 5.9 prev

Market Movement Recap

08:29 AM

Stock prices and bond yields moved slightly higher to start the overnight session, then fell after the presidential debate.  All of the above could also be summed up as sideways movement due to the low magnitude of the move.  Case in point, MBS are +0-00 right now and 10yr yields are only half a bp lower.  S&P futures are off a third of a percent.  

10:24 AM

Plenty of weakness starting at 9:30 (relative to the recent absence of volatility).  Reasons discussed in this alert (technicals, stimulus talk from Mnuchin, econ data, 9:30am NYSE open on a month-end trading day).  10yr yields up more than 3bps to .684 and 2.0 UMBS down nearly an eighth to 103-12 (103.125).  

02:34 PM

Prices fell further after the last update and then bounced just after the noon hour to leave us roughly where we were 3 hours ago. Weakness remains in Treasuries to the tune of 3bps in 10yr yields (.682% currently) and an eighth of a point in MBS (103.125).   McConnell headlines pushing back against stimulus prospects sparked the most recent gains for bonds.