The market has been under a little pressure all day, primarily due to hedging for today’s 10 year note auction (21 billion)

The market has been under a little pressure all day, primarily due to hedging for today’s 10 year note auction (21 billion).  The market seems to be set up for consolidation, but one that will take the yield only a few bps higher.  Traders will most likely buy the dip and then repeat the process tomorrow for the 30 year auction (13 billion).  Given the fear that’s rumbling through Dubai and Greece, and now spreading to down grade warnings for the UK and Spain, it’s a stretch to see the treasuries trading any higher than 3.50% on the note.  We see traders buying the dip due to all of the above and the tendency to sit on their hands into year end.  The news today was light (see below) with what little we had being second tier data.  Overall, the market remains defensive and choppy yet still holding neutral trending indicators.  Currently, the 10 year note is off 5/32’s (yield 3.41%), mortgage backs off 6/32’s (we priced down 4/32’s), and stocks up 7 points on the Dow.  Keep and eye on the market as the auction results are released (high noon cst).  Barring any surprise, we’re looking for a little rebound (improvement) in yields.

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