There are two ways to approach today's bond market movements, and they're quintessential examples of the "glass half empty/full" expression.

Glass Half Full: bonds rallied following the 30yr bond auction.  10yr yields remain under the most critical long-term inflection point at 2.50, and thus can still hope that it serves as a ceiling from which a rally can take shape into year-end.

Glass Half Empty: bonds may have rallied after today's auction, but only because they sold-off aggressively from the morning hours.  While we were hoping that last Friday's afternoon weakness was a temporary concession for the auctions, yields remain in line with those levels after trading both sides of them over the past 2 days.  We didn't even attempt to return to Thursday's range.

2016-12-13 Close

For all of the hope and fear based on the post-election range and recent technical considerations, tomorrow's Fed announcement remains an important event.  There's a risk of adopting an overly dismissive attitude about the Fed because we're all so certain they're going to hike.  

True, that certainty is justified, but anxiety is also justified because the Fed MUST do something to address the things that have transpired between now and their last meeting.  They can do this in the announcement itself, or in Yellen's press conference, or in the release of the economic projections (aka, the "dots").  We're way past the consideration of a hike tomorrow (they'll hike).  Rather, markets want to know where we're going from here.  Specifically, is the Fed anywhere near as spooked as financial markets regarding the repricing of growth and inflation concerns? If so, we have big problems.  If not, that's precisely why rates have been trying to hold on to this 2.50%-ish ceiling.


MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
FNMA 3.5
102-06 : -0-01
Treasuries
10 YR
2.4730 : -0.0060
Pricing as of 12/13/16 4:52PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
1:09PM  :  Finally a Strong Auction. Let's See How Markets Trade It
12:01PM  :  ALERT ISSUED: Negative Reprices Now Likely
10:15AM  :  ALERT ISSUED: Negative Reprices a More Serious Risk Now
9:58AM  :  ALERT ISSUED: Negative Reprice Risk Already a Consideration for a Few Lenders

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Victor Burek  :  "i would think only way to break 2.50 is a bullish fed or dot plot"
Brent Borcherding  :  "We've found our ceiling."
Scott Lushing  :  "aren't rates going to drop after the fed announces tomorrow?"
Jason Anker  :  "Fed is in the afternoon so not an unusual amount of risk at market open"
Mike Christensen  :  "Damage is done today if you have had a reprice for the worse. I would wait to see what tomorrow brings and keep my finger on the lock button. we have also held under 2.50% which is also a good sign. Just my 3 cents"
Ryan Blu Beacham  :  "is anyone locking today?"
Matthew Graham  :  "A-"
Matthew Graham  :  "RTRS - PRIMARY DEALERS TAKE 26.84 PCT OF U.S. 29-YEAR 11-MONTH BONDS SALE, DIRECT 9.3 PCT AND INDIRECT 63.86 PCT"
Matthew Graham  :  "RTRS - HIGH YIELD AT LATEST 29-YEAR 11-MONTH BOND SALE WAS MORE THAN 1 BASIS POINT BELOW ITS 1 P.M. WHEN-ISSUED LEVEL - REUTERS DATA"
Matthew Graham  :  "RTRS - U.S. 29-YEAR 11-MONTH BOND BID-TO-COVER RATIO 2.39, NON-COMP BIDS $5.05 MLN"
Matthew Graham  :  "RTRS - U.S. SELLS $12 BLN 29-YEAR 11-MONTH BONDS AT HIGH YIELD 3.152 PCT, AWARDS 72.53 PCT OF BIDS AT HIGH"
Matthew Graham  :  "30yr bond auction preview: The average bid-to-cover has been 2.22x with the last auction coming in at 2.11x. The yield expectation is 3.166. Indirects have averaged 57-62%. (more on these terms here: Treasury Auction Jargon, Definition, and Significance "