MBS Back into Positive Territory; Broader Bond Market Still on Fence
Fannie 3.5s are up 6/32nds from the time that many lenders printed initial rate sheets, and are now officially back to positive territory on the day at 101-29. 10yr Treasuries are still about 1 bp higher on the day at 2.56. In addition, this is right on the edge of a 'pivot point'--a horizontal line that's more likely to turn yields back in the other direction, but that connotes extra significance if broken.
So essentially, we're waiting to see if 10's can break below 2.56 today. That would be the first significant pivot point that would increase our fighting chances heading into tomorrow's NFP. The dream-come-true pivot point is all the way down at 2.53, however. That seems like too much to ask for now.
The other thing to keep in mind is that today's resilience likely has much to do with 'month-end' tradeflows. (read more...) And the connectivity between bond yields and stock prices suggests asset-allocation trading (i.e. money managers adjusting %'s of stocks vs bonds). These are positive factors that would not be in play tomorrow.
Bottom line, the more that 10yr yields could break below 2.56, the better. The more they refuse, the worse the long-term implications are.