2.95% in 10yr Treasury yields had become a bit of a battleground last week.  Even in the week prior, there were two big bounces there (3 if you count Monday's 2.96%).  By the end of last week, it looked like a done deal.  The only catch was that you would need to have tuned out after the initial rally on Friday morning when yields made it all the way down into the 2.91's.  After that, a late morning selling spree took yields all the way back to the proverbial fence (2.95%, in case that wasn't clear).

With that, the current week inherited the task of deciding whether we break or bounce.  Yesterday was little help in that regard as rates continued to hold sideways amid exceptionally low volume.  As trading activity ramped back up today, it was clearly bond sellers in control.  Yields were up to 2.98+ by mid-day and they closed at only slightly lower levels.  Fannie 3.5 and 4.0 MBS both fell by at least an eighth of a point.

Tomorrow brings the 10yr Treasury auction--an event that may have tipped the scales in favor of higher yields today.  It's not uncommon for bond traders to favor higher yields ahead of an auction for a variety of reasons.  Unfortunately, the Consumer Price Index (CPI) follows closely on Thursday morning, and that's an even bigger jumping-off point for trading goals.  In other words, even if we are seeing some tactical weakness ahead of the auction, a strong result for that auction may not benefit us as much as it otherwise would.  For that, we'll need CPI to play ball too.


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
99-04 : -0-06
Treasuries
10 YR
2.9722 : +0.0222
Pricing as of 5/8/18 5:29PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
11:34AM  :  ALERT ISSUED: Negative Reprice Risk Increasing
9:19AM  :  ALERT ISSUED: Very Slight Reprice Risk For a Few Early Lenders

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Sung Kim  :  "lol"
Sung Kim  :  "After taking all the numbers in, First American chief economist Mark Fleming blogs that, as long as rates stay below 8% (which they will) home affordability will remain strong enough to withstand the growing, higher costs to borrow."
Dan Draitser  :  "Straight from the 4000.1 for "family member": Family Member is defined as follows, regardless of actual or perceived sexual orientation, gender identity, or legal marital status:  child, parent, or grandparent; o a child is defined as a son, stepson, daughter, or stepdaughter; o a parent or grandparent includes a step-parent/grandparent or foster parent/grandparent;  spouse or domestic partner;  legally adopted son or daughter, including a child who is placed with the Borrower by an authorized agency for legal adoption;  foster child;  brother, stepbrother;  sister, stepsister;  uncle;  aunt; or  son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-inlaw, or sister-in-law of the Borrower."
Sung Kim  :  "the relationship must not be because of the transaction"
Jeff Anderson  :  "Any idea what you used to "document". What was your scenario? Friends forever type situation?"
Caroline Roy  :  "you can do it with a documented "familial" relationship. i've done it and it wasn't actually that bad."
Jeff Anderson  :  "FHA still requires a non-occupant co-borrower to be a family member? I see a mixed answer in All Regs."
Matthew Graham  :  "RTRS - U.S. SELLS $31 BLN 3-YEAR NOTES AT HIGH YIELD 2.664 PCT, AWARDS 79.47 PCT OF BIDS AT HIGH"
Matthew Graham  :  "3yr auction preview: bid-to-cover = 2.97x (recent avg), and current when-issued yield is 2.663-2.667. We don't focus on indirect bid for 3yr auctions. For more on these terms, see this: Treasury Auction Jargon, Definition, and Significance "