Esoteric Forex Drama Blasts Bonds, Maybe

Esoteric Forex Drama Blasts Bonds, Maybe Friday was very much NOT on the beaten path of typical bond market considerations with most of the selling arguably stemming from Japanese currency intervention. We've seen similar episodes in the past, but  today's installment came with a twist. In addition to Japan confirming it was selling foreign bonds to prop up Yen values, the U.S. Treasury also apparently got involved. It warned dealers that it could make trades to support the Yen. No one but those involved knows if that means anything beyond using the ESF to execute currency trades, but the net effect seems to have been to grease the skids for U.S. accounts to sell Treasuries first and ask questions later. This isn't necessarily the final story either. It was also month-end, and it's also the week before the jobs report on a summertime Friday. Volume was fairly light relative to the size of the sell-off. Econ Data / Events Employment costsQ2 0.9% vs 0.8% f'cast, 0.9% prev Market Movement Recap 08:39 AM Weaker after ECI data. MBS down about an eighth and 10yr up 2.3bps at 4.696 10:29 AM Sharply weaker. MBS down a quarter point and 10yr up 4.9bps at 4.722 01:06 PM Weakest levels. MBS down almost 3/8ths and 10yr up 6.2bps at 4.736