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Minimal Change After Overnight Volatility

by Matthew Graham

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Minimal Change After Overnight Volatility War headlines struck back in the overnight session. Specifically, Iran struck back against various U.S. and allied sites, allegedly in response to U.S. strikes on Iranian sites. Peace prospects take an obvious hit in response to these escalations and financial markets remain willing to react accordingly. Oil prices were already moving up to the highest levels in more than a week in the overnight session and that momentum peaked at 6am ET. Treasury yields followed and then stayed broadly sideways for the duration of the domestic session. In the bigger picture, 10s are well within the 4.43-4.51 range that dominated last week. War headline sensitivity continues accounting for 90% of forward-looking volatility risk while econ data rounds out the rest.  Econ Data / Events ADP jobs (May) 122K vs 117K f'cast, 109K prev ISM N-Mfg PMI (May) 54.5 vs 53.8 f'cast, 53.6 prev ISM Services Employment (May) 47.9 vs -- f'cast, 48.0 prev ISM Services New Orders (May) 57.3 vs -- f'cast, 53.5 prev ISM Services Prices (May) 71.3 vs -- f'cast, 70.7 prev Market Movement Recap 08:17 AM Moderately weaker overnight on renewed Iran war hostilities.  Not much reaction to ADP data. 10yr up 3.7bps at 4.49 and MBS down a quarter point 10:17 AM modest improvement after ISM data, but only in Treasuries. 10yr up 2.3bps at 4.476 and MBS still down a quarter point 11:45 AM weakest levels with MBS down 10 ticks (.31) and 10yr up 4.5bps at 4.498 02:37 PM Sideways at weaker levels. MBS down 9 ticks (.28) and 10yr up 3.6bps at 4.489

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