The Treasury market took a pretty sharp header and gave up all of its overnight gains and then lost significant ground. The 10 year note which had been up 10 ticks reversed course andwas down on the day. It has turned around again and is now up 6 ticks on the day with a yield of 3.43 percent.
The carnage in the Treasury market resulted primarily from rate lock selling. That is according to two salesman at reasonably large shops.
I note that because swap spreads are actually tighter than when I wrote earlier.Two year spreads are at 34. Five year spreads are at 35. Ten year spreads are at 21 and 30 year spreads are at NEGATIVE 11.
Another participant commented that hot money wanted to be short for the Chicago PMI and they were pounding the market, too.
Separately, the three month/ten year ATM swaption straddle is about 526 basis points.