MBS Pricing Snapshot

10yr yields topped out just over 1.72 after a quick trip higher heading into the 9:30am cash open for stocks. Stocks sold out of the gate and Treasuries followed. Though one degree of separation removed, MBS followed as well, moving higher in price.

As stocks have continued ratcheting lower, and as the Fed is in for scheduled buying in the 25-30yr space, 10's and MBS have progressed to their best levels of the morning. For 10's, that's 1.695 currently--down 2.5bps on the day. MBS are up 3/32nds at 104-06. This is probably enough for an early lender or two to reprice positively if we hold here or better after 11am.

10's bounced on the same pivot point from earlier this morning at 1.702, this time treating it as a ceiling rather than a floor. This gives us a line in the sand to watch in the event of weakness (next three would be 1.712 and 1.719 with 1.733 the most serious). If the positivity continues, we'd need to get through 1.683 before getting too excited, and 1.678 would be most excellent. MBS would have to get over 104-07 to challenge this week's highs. S&Ps are down a quick 20+ points, completely erasing yesterday's bounce back and putting stocks into threatening technical territory.

The overnight session wasn't too much more volatile than the previous example but the movement between the highs and lows happened much more quickly. Speaking of those highs and lows, today's have been exactly the same as yesterday's so far.

Considering the rapidity of the move higher in Treasury yields early in the European session, the fact that they topped out right at 1.733 is exactly the kind of technical cue we were hoping to see today. Later in the European session, even faster than the earlier spike higher in yields, Treasuries notched abruptly back lower, precisely to yesterday's European lows at 1.70, following German Bunds.

The hard charge back down in yield (relatively), makes the mostly data-free session look like a concerted effort to get in position for a German Bund auction. When the auction went off without a hitch, yields quickly returned to where they came from.

US Treasuries followed those moves in lock-step, but have begun marching to their own beat with the onset of the domestic session. Early US trading helped reinforce the resistance at 1.70, but without any major fuss. 10's are only up to 1.715, still in positive territory vs yesterday and well below the near term ceiling at 1.733

MBS opened up 2-3 ticks higher and haven't done much so far this morning. Fannie 3.0's are currently +1/32nd on the day at 104-03. There's a slightly bearish tilt in play since the US open that we'll have to keep an eye on. 1.719 is a short term technical line in the sand for 10yr yields with 104-02 being the analogous level for Fannie 3.0s.