Bonds made it 3 days in a row today--rallying to the best levels since mid-January.  In fact, apart from Jan 17th, today's closing yields were the lowest since late November!

Why is all this happening?  That's a great question, judging by the various explanations being thrown around among market participants and in financial media.  Most of the credit is going to some iteration of "politics," either in the US or with respect to European elections.  That probably has more to do with the fact that political news is one of the only games in town this week when it comes to potential market movers.  

A more plausible case could be made for last week's jobs report causing the shift in momentum (i.e. weak wage growth casting doubt on the previously perceived pace of Fed rate hikes).  Whatever the case, traders were taking a lead-off ahead of today's 10yr auction.  This is rare, but we see it happen from time to time.  It refers to a paradoxical strength in bonds that results in the day's best levels just before the auction.  

In the rarest cases, the auction justifies the lead-off and truly huge rallies ensue.  In the more common case (like today's), the auction doesn't quite live up to the hype and bonds find their limit.  The bounce back could have been much worse after today's auction.  Bonds never even threatened to turn red, and ultimately made it most of the way back to the pre-auction levels.  

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.5
102-27 : +0-10
10 YR
2.3400 : -0.0490
Pricing as of 2/8/17 5:36PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
2:37PM  :  Post-Auction Weakness Subsiding
1:33PM  :  ALERT ISSUED: Negative Reprices Becoming a More Serious Threat
1:21PM  :  ALERT ISSUED: Negative Reprice Risk Increasing For 1 or 2 Lenders
1:10PM  :  ALERT ISSUED: Buyers Pushed a Bit Too Far and Got a Weak Auction
10:11AM  :  Gains Extend at NYSE Open; Best Levels in 3 Weeks

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "Indirect bidding has been running 63%."
Matthew Graham  :  "Refunding auctions (which this is) have been coming in around their 1pm "when-issued" level (which is like the auction expectation). Current when-issued is 2.314."
Matthew Graham  :  "The recent average bid-to-cover has been running in the 2.4's. Last auction was 2.58x."
Matthew Graham  :  "The following auction preview contains potentially-confusing jargon. If you need to brush up, use this: Where can I find definitions to abbreviations and other Terminology, Jargon?"
Sung Kim  :  "what are we watching out for?"
Brent Borcherding  :  "Pretty strong 2 day rally into the auction...if its well out."