Bond Markets Lose Ground Following 3pm Treasury Close.
While Treasuries and MBS both continue trading until 5pm, the CME pit trading for Treasuries ends at 3pm. For many firms, this is the end of the day in Treasuries. In today's case, it's also the end of the month. Any legitimate or opportunistic trading that had been driven by month-end buying needs subsides for the most part and whatever's left over has an outsized effect on trading levels.
If it helps, think of this dynamic like an imaginary wholesale grocery swap meet where Costco and Walmart go to buy and sell in bulk with hundreds of small to medium suppliers. The suppliers themselves would also be buying and selling from each other to some extent. If this imaginary grocery swap meet ran on the Treasury market's calendar, at 3pm, Costco and Walmart, along with a majority of the other attendees would leave the building. In the smaller, less liquid market that remains, the price of certain groceries could quickly change depending on who is left and what the supply and demand is like.
In the same sort of way, the post 3pm trade has seen prices fall in bond markets, but it's nothing too severe for now. 10yr yields moved up from 2.458 to 2.473. Fannie 3.5s are off 3 ticks from afternoon highs, but only 2 ticks from the sustained highs. This isn't quite grounds for negative reprice risk yet, but we can only speak to reprice risk resulting from MBS Prices. A slightly volatile price environment on the last day of the month can result in reprices that don't always make sense, for better or worse--usually worse. We don't have any reason to expect them at this point. Just something to keep in mind if you're floating with a lender who has historically put out one of those late day non sequitur reprices.