After Friday's initial NFP-inspired volatility, bond markets had settled into a very narrow sideways range in anticipation of the next big piece of guidance. The leading suspect among potential guidance givers was today's Congressional Testimony from Fed Chair Yellen, and rightfully so based on how the day went.
Bond markets began selling off on the simple release of Yellen's prepared remarks. This was not often seen during Bernanke's tenure and definitely gave the impression that markets were anxiously waiting to hear from her. After the initial bout of selling, things didn't deteriorate too much more. This kept most lenders from repricing, but only because morning rate sheets captured a good amount of the initial drop in prices. Both MBS and Treasuries are coasting out the door near their weakest levels of the day.
Keep in mind that MBS prices will drop some time after the close today as the "front month" MBS coupon shifts from February to March. This drop usually runs between 8 and 12/32nds and does not affect reprice risk.
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