Bond Markets Weaker Overnight; MBS Back in the Green, but Remember the Roll
With yet another session devoid of market-moving data or events, Treasuries and MBS are left to take their cues from other markets and from tradeflow considerations. The overnight session was weaker after central banks in Japan and Europe were generally unenthusiastic about QE. Japan was outright dismissive whereas the ECB simply noted that last week's news about a €1 trillion stimulus package was simply a matter of preparation with actual QE being undecided and not yet close to happening.
There were no major market reactions to that central bank news, however. It merely stands as a backdrop for the uneventful weakness. 10yr yields moved up from a 2.703 close to open just over 2.71 today. Fannie 4.0s were only down 3 ticks at the open and are already back to unchanged.
Keep in mind, that "unchanged" in MBS isn't exactly "unchanged" as the roll is after the close tonight. That means the displayed prices on MBS will switch from April coupons to May. That will make it look like prices have dropped though we're simply shifting our viewfinder to highlight the next bucket of MBS on the assembly line, which have always been trading at lower prices.