Beware The False Hope in MBS Today
MBS ended up with a nice little rally after 2pm that brought prices 3/8ths higher. Treasuries, on the other hand, set new long-term yield highs today. The latter is where we would continue to look for general guidance on rate trends. That’s not to say 10s are destined to break above 4% and keep rising (totally possible, but not a given)–simply that the gains in MBS are specific to MBS (in case that wasn’t already obvious). Today’s video talks more about the outperformance and the broader rate considerations. There’s a lot going on (in case that wasn’t already obvious).
Econ Data / Events
-0.2 vs -0.4 f’cast
Core Cap-Ex (non-defense, excluding aircraft)
1.3 vs 0.2 f’cast
FHFA Home Prices
-0.6 vs +0.1 prev
108 vs 104.5 f’cast
New Home Sales
685k vs 500k f’cast
Market Movement Recap
08:58 AM Token recovery overnight, no reaction to Durable Goods, and now selling off a bit as bonds follow UK markets. 10yr still down 6.5bps at 3.864 and MBS up 11 ticks (.34), but down more than a quarter point from the highs.
09:31 AM Gains mostly gone now with yields led higher by a sell-off in EU bonds. MBS down 5/8ths intraday and up only 6 ticks (.19) from y’day. 10yr yields down only 3bps after being down more than 12bps at the best levels.
11:21 AM 10yr in negative territory, up 3.5 bps at 3.966 and UMBS 5.0 still up almost an eighth of a point.
02:38 PM Decent little bounce off the PM lows for MBS–now up more than 3/8ths on the day. 10yr still 2.7bps higher at 3.955. No obvious catalyst. 2pm is more prone to volatility than the noon-2pm window.