Market action today has been like watching paint dry.  Up a tick, down a tick, just not much volatility.  Earlier today, Weekly Unemployment Claims fell 6K to 462K.  Continuing Claims went the other way, up 37K to 4.558 million.  Both prints were close to economists’ expectations.  At high noon, the Treasury auctioned 13 billion of 30 year bonds.  The issue flew off the shelves at a yield of 4.679% with 23.6% going to Indirect Bidders and 29.6% taken by Direct Bidders.  The direct bid was huge, showing tremendous interest by domestic investors.  Bid to cover came in at 2.89% compared to an average of 2.51% (very good) but the best part was that the auction was taken at a yield that was under the yield trading at deadline (4.71%).  Traders call this “bidding through the screen” or a “bullet auction”.  Overall, give it an A.

Even with the great auction, nothing happened with pricing on 2 year through 10 year notes.  The 30 year bond has all the action, going from down 2/32’s to up 14/32’s in a nanno second (flatter yield curve).  Currently, both the 10 year note and mortgage backed securities are off 1/32nd.   Technically, strong auctions this week have not rallied the market but have kept prices above major support, the 40 day moving average, and above the daily trend line.

The problems for bond bulls is that almost all daily oscillators show little upside potential (not much chance of a rally).  Mortgage backs do however have added support with traders and FNMA/FHLMC continuing to buy back positions.  Looks like a tug of war that no one wins.  Best to take advantage of current mortgage pricing with such low odds of improvement in the cards.  Currently, we’re trading 3.73% with the extremes at 4.62% and 2.0%.  Lots of room to run (either way) as the economic picture changes.