Although MBS did a good job of pushing back against a recent bout of underperformance over the past 3 sessions, today showed it won't be a straight shot. In other words, MBS had closed the gap to Treasuries somewhat since Friday, but it widened again today. This was ultimately only exceptionally noticeable compared to yesterday.
When viewed against the backdrop of the past 5 days, nothing too troubling is going on between Treasuries and MBS, and nothing that can't be explained. Such an explanation would included elevated supply from MBS originators as well as geopolitical risk having a more direct effect on Treasuries.
Both sides of the market started out in stronger territory today thanks to bond-market-friendly comments from the Bank of England--essentially the only market mover of note overnight. At 10am, European bonds bounced at their best levels and domestic equities began improving. Treasuries and MBS followed those moves by embarking on a selling spree that was moderate, but pervasive. By the close, trading levels remained well-within the week's existing range on all accounts.
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