Yesterday's recap suggested the week had yet to officially begin and that Monday's trading session had been more of an unofficial 3rd day of the weekend.  The week definitely "began" for bond markets today, and we'd very much like to go back to that unofficial 3 day weekend, please and thank you!

Bonds tanked, obviously, with Fannie 3.5 MBS losing more than a quarter of a point and 10yr yields rising to challenge the important technical ceiling at 2.42%.

Much of the weakness was a gift from the overnight trading session, led by European bond market weakness.  The latter is most easily seen as defensiveness ahead of Thursday's policy announcement from the European Central Bank. 

Domestic trading brought some weakness of its own following JP Morgan's weekly update of its Treasury clients' trading positions survey.  Whereas some folks might have guessed traders were interested in buying the recent dip in bond prices, the survey suggested traders were even more keen on selling bonds.

The early weakness played out before 8am, leaving most of the domestic hours to drift sideways.  Traders did, however, find another great chance to sell bonds after a 3pm headline suggesting Senate leaders informally endorsed John Taylor as a candidate to take the Fed's reins from Yellen. 

The issue was they did so by a show of hands after being asked directly by Trump himself.  There was some confusion as to whether this was an indication of Trump's leanings or if the experience would influence his decision.  Markets ultimately decided it was bad for bonds and pushed bonds into the day's weakest territory during the last hour of trading.


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
102-16 : -0-09
Treasuries
10 YR
2.4208 : +0.0458
Pricing as of 10/24/17 7:16PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
4:20PM  :  ALERT ISSUED: Negative Reprices Becoming More Possible/Likely
3:12PM  :  ALERT ISSUED: Slight Increase in Reprice Risk on Taylor Headline, Knee-Jerk Trading
11:58AM  :  ALERT ISSUED: Bouncing Along The Lows, Near Reprice Risk Territory
8:43AM  :  ALERT ISSUED: Bonds Slammed by Variety of Factors

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "Gundlach looking for another entry point if he can just push yields a bit higher? "The moment of truth has arrived for secular bond bull market! Need to start rallying effective immediately or obituaries need to be written.""
Matthew Graham  :  "so like MH said earlier, high stakes. Not just ECB, but Fed Chair and Tax reform headlines as well (although tax reform is a less immediate threat as far as big-ticket market movers go. We've already priced in a lot of the possibility of "something" getting done, so I don't see as much upside risk for yields solely on tax reform possibilities. Perhaps this is what SK was alluding to moments ago)."
Matthew Graham  :  "I think the meaning is that traders are braced for a negative impact at the highest part of the longer-term range."
Steve Chizmadia  :  "Does 2.42 holding mean anything or is this just traders showing placing their bets on ECB Thursday. I'd be concerned if we had a convincing break of 2.42 prior to Thursdays announcement."
Matthew Graham  :  "I've taken part in quite a few polls to predict future rate levels. It's always a guessing game. Everyone wants to believe someone might have a better idea than a random number generator, but if that ever seems to be the case, it's usually because successful guesses were retroactively promoted."
Matthew Graham  :  "man, I was stressed that it took me so long..."
Timothy Baron  :  "MG, your alert was 22 minutes earlier than a certain competitor's."
John Tassios  :  "GOP is pushing for Taylor, but Trump aides pushing for Powell"
Matthew Graham  :  "TAYLOR APPEARED TO WIN SENATE GOP STRAW POLL, SEN. SCOTT SAYS"
Matthew Graham  :  "wow, some big trades hitting"