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10yr Testing 2.66, MBS Outperforming but Still Down on the Day
Posted to: Micro News
Friday, June 20, 2014 9:11 AM

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Ironically, on a day with the least to offer in terms of market-moving events this week, bond markets are doing just as much to test recent ranges as they did with the post-FOMC rally.  After testing 2.57% by yesterday morning, 10yr yields are now on the opposite end of the spectrum, bumping up against 2.66 several times in recent minutes.

Volume was light overnight and has picked up noticeably into this morning's sell-off.  That said, it's only noticeable relative to super quiet overnight session.  Point being: moderate volume constitutes a big incr3ease in this case, and is having an outsized impact on trading levels.  This IS NOT to suggest that when volume picks up next week (or even later today) that buyers are necessarily waiting in the wings--merely to account for the quickness of this morning's move that's taken 10's from 2.61 to 2.66 in short order.

As noted in the Day Ahead, it's an options/futures expiration day for Treasuries.  As such, the weakness we're seeing is centered there while MBS outperform somewhat.  Whereas 10's are down 9 ticks in price from yesterday, MBS are down only 5 ticks in Fannie 3.5s and 2 ticks in Fannie 4.0s (the latter begins to be more relevant if we lose much ground from here).

There are no significant scheduled events today and there have been no compelling headlines that speak to near-term risks or opportunities.  Not only that, but the biggest potential market movers of the day are trades associated with the aforementioned futures/options expirations--very much an "unseen hand" sort of market mover. 

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Mortgage Rates:
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  • 15 Yr FRM 2.96%
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  • Jumbo 30 Year Fixed 3.62%
MBS Prices:
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  • 30YR FNMA 5.0 110-22 (0-01)
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  • 30YR FNMA 5.5 111-30 (0-02)
Recent Housing Data:
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  • Refinance Index 11.33%
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  • Purchase Index 8.43%