"Support" and "resistance" are two terms often thrown around in market analysis.  They loosely refer to ceilings and floors respectively (as far as rates are concerned), but it's slightly more complicated than that (as covered in our primer on MBS Live).  The gist is that ceilings and floors can still be broken, but they represent levels where rates have been more likely to bounce vs break through.  

With the past 2 days of sideways apathy, the 2.42% ceiling in 10yr yields was getting some potential affirmation.  We needed to see how markets would move once the week's bigger-ticket events came out.  Investors were waiting for Yellen's semi-annual congressional testimony for an indication that her tone had shifted in a similar fashion as several of her Fed colleagues.   Her opening remarks (released at 8:30am) were enough to do the trick.

Yellen didn't say anything remarkably new and different, but she did acknowledge that the Fed is very close to a neutral policy rate (i.e. not many more rate hikes needed).  Her assessment of the economic outlook was slightly more downbeat and her acknowledgement that the Fed could foreseeably need to buy bonds again served as a reminder of what the Fed is thinking about ("how do we respond to the next downturn?").  

All of the above was enough for a nice rally in bonds immediately following the prepared remarks.  This reinforces the supportive ceiling at 2.42%, but it also reminded us about the resistance at 2.30% (because that's where the rally fizzled).  


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
102-21 : +0-08
Treasuries
10 YR
2.3195 : -0.0425
Pricing as of 7/12/17 5:20PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
1:12PM  :  Asleep From Yellen Testimony, Markets Roused by 10yr Auction
10:09AM  :  MBS Off Highs, but Reprice Considerations are Complicated
8:42AM  :  Slightly Stronger After Yellen Remarks

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
John Tassios  :  "her opening remarks pretty much summed up. Should have adjourned right after that.Her answers mirrored her opening remarks."
Matthew Graham  :  "2 hours of my life I'll never get back. They should put us in charge of moderating these testimonies. We could have gotten that done in 10 minutes. "Oh, you want to grandstand about some local issue that no one here cares about? NEXT!""
Matthew Graham  :  ""B" auction considering the rally. Not too bad, just a miss on the yield (understandable in light of the rally)."
Matthew Graham  :  "bid-to-cover average was 2.48, expected yield was 2.315, and average "miss" (aka "tail") was 0.25 bps. (this auction missed by 1bp). Indirects averaged 65.6%. For more on these terms: Treasury Auction Jargon, Definition, and Significance "
Matthew Graham  :  "RTRS - PRIMARY DEALERS TAKE 29.45 PCT OF U.S. 9-YEAR 10-MONTH NOTES SALE, DIRECT 5.75 PCT AND INDIRECT 64.8 PCT"
Matthew Graham  :  "RTRS - U.S. SELLS $20 BLN 9-YR 10-MO NOTES AT HIGH YIELD 2.325 PCT, AWARDS 5.42 PCT OF BIDS AT HIGH"
Matthew Graham  :  "RTRS - U.S. 9-YR 10-MO NOTES BID-TO-COVER RATIO 2.45, NON-COMP BIDS $11.74 MLN"