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First Hurdle Cleared. More to Come

First Hurdle Cleared. More to Come On what has the potential to be a momentous week, the bond market has cleared its first major hurdle and is no worse for the wear.  Treasury released the first of two issuance announcements this afternoon, showing a $76 billion decrease versus the July estimate.  That decrease should be partially finalized on Wednesday morning when specific auction sizes are announced. Bonds had been slightly weaker in advance of the news and made modest gains in its wake.  It is best to think of this outcome as a “cleared hurdle” as opposed to the race being won. There are more challenging hurdles in the coming days.  Those will determine the race, but this is a good start nonetheless.  Events and volatility potential only increase from here. Market Movement Recap 11:05 AM Steadily weaker overnight with a decent recovery into 10am and more selling at 10:30am on BOJ headlines. Bouncing back again now.  10yr up 5.3bps at 4.898.  MBS down an eighth. 01:09 PM MBS resilient despite modest weakness in Treasuries.  10yr up 5.8bps at 4.903.  MBS down an eighth still. 03:14 PM Favorable response to Treasury issuance announcement.  10yr up only 1.7bps at 4.862.  MBS unchanged.

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