After starting the day just slightly stronger, and with absolutely nothing by way of major market-moving considerations, Fannie 3.5s moved up over half a point today (at times, more than .625) to 103-08.  They were about a point lower yesterday morning.  So how'd THAT happen?

This was mostly covered in the Mid-Day: Bonds End 2 Weeks of Consolidation... With a Massive Rally.

As unsatisfying as it is, there's no big, secret, driving force behind today's move.  European markets certainly didn't lead Treasuries lower this time around, although the fact that core European debt reversed last week's selling pressure during the first two days of this week probably helped.  At least we could say that Europe didn't get in the way.

Beyond that, and already mentioned in the link above, there was some early month-end buying among money-managers who are forced to buy a certain amount of bonds by the end of the month in order to match portfolios to various indices.  From there, all it really takes to get today's sort of rally is for 2.47% in 10yr yields to come under sufficient pressure. 

2.49% served as the opening act, with buying picking up quickly beofre a brief pause as 2.47.  Once 2.47 was broken, snowball buying is more than enough to explain the rest of the run down to 2.445.  Lower-than-average volume greased the skids for big trades to have larger-than-average effects.  Given the surprises seen at the last reading of GDP, traders would rather get their bond-buying done before this one comes out, and simply sell-off accordingly if it's stronger than expected.  That's much easier and less costly than having to chase a rate rally after beginning the day betting on rates that quickly proved to be too high.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
99-07 : +0-22
FNMA 3.5
103-08 : +0-17
FNMA 4.0
106-02 : +0-11
2 YR
0.3711 : -0.0189
10 YR
2.4449 : -0.0731
30 YR
3.2958 : -0.0712
Pricing as of 5/28/14 4:53PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
2:45PM  :  Ongoing Positive Reprice Potential as Rally Faces Few Threats
10:20AM  :  Rally Getting Progressively More Serious
9:36AM  :  Bond Markets Rallying Hard This Morning; Best Levels Since June 2013

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Frank Hanna  :  "FNMA c/o closed 9/23/2013... borrower wants to consider refi now. Would new loan be considered a c/o because <1yr old?"
Sung Kim  :  "its 6 months frank"
Sung Kim  :  "this move has legs today?"
Matthew Graham  :  "at least one!"
Christopher Stevens  :  "What has me irritated is I am car shopping and the way I am treated by car salesman is ridiculous. Love the "let me talk to my manager" line still being used. As a test I shopped a car and got a price on it. I then sent my wife in later that same day and she got a price $1,500 less than I did on the same car. CFPB where are you? I also decided my wife should be in sales. "
Thomas Quann  :  "Keep Going Baby ! When is it an official FACE MELTER?"
Ted Rood  :  "feels a little toasty now, TQ."
Matthew Graham  :  "24 ticks according to the by-laws TQ"
John McClellan  :  "based on the "bylaws" looks like the 10 year is a "face melter""
Tom Bartlett  :  "Hi MG-are bond yields pointing to recession? What is causing this run on bonds?"
Matthew Graham  :  "TB, I think Eurozone QE potential next week is one of the bigger considerations, along with an ongoing pain trade for all those who bet on higher rates in 2014. I.E. "forced short-covering" of an exceptionally large short base. There are economic arguments as well, and while I'm personally generally very concerned with the wealth gap and lack of wage inflation, I don't have much of an opinion on forward indicators of recession. Probably, the bond market is still too messy a place to serve that historical purpose."
Sung Kim  :  "repricing growth expectations"
Matthew Graham  :  "maybe, but what's the baseline? In a bond market that's just lived through 2008-2013, how can we even be sure which trading levels line up with which levels of growth? It's not the same environment that it ever was (♫same as it ever was?♫ answer: no). So does 2.25% = growth pessimism or is it the more like the low 3% range that has historically served that purpose, but is simply depressed and repressed by QE and prospects for more QE among other less historically typical things?"
Hugh W. Page  :  "Maybe QE has messed up the pricing mechanism in the markets to the point where we simply can't make any rational conclusions anymore."
Christopher Stevens  :  "MG- as always this site has more useful and pertinent info than any talking heads on tv "