If you'd like to reduce this week's activity to a very basic concept and seek to explain just about everything we've seen in the past week as a function of that concept, that's probably just fine.
It's not a new concept either, but one of the fairly consistent ideas we discuss of prices/yields 'orbiting' around certain key technical levels. Of course MBS aren't following Treasuries in perfect lock-step, but the broader momentum in "rates" tends is what we're interested in here. In that regard, 10yr yield technical levels will tell us more than MBS, while we keep an eye on the latter specifically for intraday reprice risk.
So what's up with 10yr yields? In short, they've been orbiting around this central source of gravity around 2.72%. Last week's FOMC events pushed yields quickly higher past that central point, and gravity kicked in to bring them back down to earth.
Of course when that happens, it's not the only trading motivation in play, so if traders betting on higher rates get caught offsides, or if month/quarter-end buying happens to be high, then we blow right past that gravitational midpoint and end up down in the mid 2.6's as we did yesterday.
Today, then, brings the week to a logical close with yields moving nonchalantly back to 2.72--a perfectly neutral stance from which to approach next week's Payrolls data, among other things.
All that to say, bond markets were weaker today after 6 straight days of "not being weaker," and that's OK. The longer term trend is this consolidative pattern around 2.72. It's not unreasonable to expect a bigger attempt to escape the clutches of this gravitational pull with next week's more important round of data.
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