After 2 weeks of solid gains, bonds have taken the past 3 days (which includes today's overnight trading) to push back in the other direction.  At least part of that story has to do with the yield curve (a topic of increased interest recently, given that the spread between 2 and 10yr yields surged to its narrowest post-crisis levels on several occasions in the past 2 weeks).  

The curve can be charted just like a yield.  Also, like a yield (or MBS price, or stock price, etc.) it can respond to technical levels.  Finally, the curve can actually be traded.  That means traders don't even have to take a position on 10yr yields going higher or lower.  They could simply place bets on 10's getting nearer to or farther away from 2yr yields. 

When any line on any chart has been pushing long-term highs or lows, investors grow increasingly wary of bounce potential.  The first bounce tends to have some additionally momentum behind it, and it looks like the past 2 days have been just such a bounce with traders piling into "curve steepening" trades as technical ceilings were broken.  Here's a chart of the 2yr vs 10yr spread (lower = narrower spread and/or "flatter" curve, higher = wider/steeper):

2017-11-10 open

The other part of the story is weakness in European bond markets, as discussed in the morning's first alert on MBS Live.  German Bunds made a case for bond market weakness yesterday and Treasuries didn't pay too much attention.  But as the yield curve began to bounce, it was akin to US bonds receiving permission to go play with their friends up at higher yields.  Alternatively, if you want to approach this bounce without relying on technicals and curve trading, you could simply say that US bonds were waiting to see what came out of the Senate's tax bill announcement yesterday, and nothing about it compelled the previous rally to resume.

2017-11-10 open2

Curve and technical trading will continue to rule the day.  Current levels have had some technical significance this month (2.38-ish).  It's possible that a supportive ceiling is already forming.  If it's broken, the next (and more significant) technical level would be 2.40%.  

2017-11-10 open3

Econ data is limited to Consumer Sentiment at 10am.  This isn't typically a big market mover, but the inflation components can have an impact if they're significantly changed from last month.

On a final note, today is "the roll" for Fannie and Freddie 30yr fixed MBS. Long story short, the left side of a 2-day chart shows prices from the November coupons (which stopped trading yesterday) while the right side (today) shows December coupons.  December coupons started trading a few months ago.  Each subsequent delivery month always trades at a discount to the month before it because any investor who buys it will be waiting one additional month to receive their first payment.  It's this time-value-of-money discount that's reflected in "the roll."  It has nothing to do with an actually change in the value of MBS--just a visual switch from one security to a less valuable security.  In a perfect vacuum with no other market movement, December MBS would gradually increase in price by the exact amount of the roll just in time for the next roll!


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
102-18 : -0-05
Treasuries
10 YR
2.3735 : +0.0425
Pricing as of 11/10/17 9:39AMEST

Tomorrow's Economic Calendar
Time Event Period Forecast Prior
Friday, Nov 10
10:00 5yr Inflation Outlook (%)* Nov 2.5
10:00 1yr Inflation Outlook (%)* Nov 2.4
10:00 Consumer Sentiment Nov 100.7 100.7