Today's key event for bonds was the 10yr Treasury auction because it served as an acid test for investor demand amid relatively uncertain times.  Unfortunately, the auction was solid, but not so solid as to suggest bond traders had miscalculated a concession that began taking shape yesterday morning.

In other words, yields were moving higher because traders knew they'd need to bid at the auction and higher yields (lower prices) make it easier to bid!  The fact that tomorrow morning brings the CPI data didn't do bond markets any favors.  

Bottom line: traders got into a defensive position ahead of these key events, and the first event confirmed a "just right" amount of defense.

10's ended the day up more than 3bps at 3.006%.  Fannie 3.5 MBS lost 6/32nds and Fannie 4.0 MBS lost an eighth of a point.


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
98-30 : -0-06
Treasuries
10 YR
3.0061 : +0.0381
Pricing as of 5/9/18 7:10PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
1:17PM  :  10yr Auction Spoke Softly, But it Didn't Say Anything Terrible
8:44AM  :  Bonds Weaker Overnight, Little-Changed After Data

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Dave Christensen  :  "True MH ... the buydown tradeoffs are decent on the 5s and 7s."
Jason Anker  :  "lots of lenders have run from shorter ARMs due to compliance concerns as well"
Jude Bridwell  :  "traders in wait and see what had happens mode"
Matthew Graham  :  "in an environment with rising short-term rates (or rather, with a yield curve that is as flat as it's been in a decade), ARMs will always be less competitive, relatively."
Matthew Graham  :  "Lots of variation between lenders, but I haven't checked to see if that's also the case with 1yr adj stuff."
Matt Hodges  :  "look at 5/1 and 7/1 in terms of buydowns. you'll get more bang for your buck buying down those programs"
Dave Christensen  :  "Thanks for the confirmation regarding ARM pricing. Figured as much but wanted confirmation that I wasn't missing any bold investors out there. Even the 5 and 7 year programs are very marginal benefit."
Matthew Graham  :  "But a C- if we approach from the context of 2 days ago. This was the highest yield award since January 2014"
Matthew Graham  :  "A-"
Matthew Graham  :  "RTRS - U.S. 10-YEAR NOTES BID-TO-COVER RATIO 2.56, NON-COMP BIDS $45.31 MLN"
Matthew Graham  :  "RTRS - U.S. SELLS $25 BLN 10-YEAR NOTES AT HIGH YIELD 2.995 PCT, AWARDS 50.13 PCT OF BIDS AT HIGH"
Matthew Graham  :  "10yr auction preview: 10's currently trading with a when-issued yield of 2.996. Average 10yr refunding auction comes in about 1.2bps above that, so something closer to 3.01% would not be a surprise. Recent average bit-to-cover has been 2.3-2.4x. Indirect bids have averaged just over 60%"
Matthew Graham  :  "index + margin.... and look at short-term rates"
Dave Christensen  :  "Interesting ... has anyone looked for a 1 year ARM lately? I haven't even been asked about one for years. Just got an inquiry and searched about 10 investors - only one has a 1 year ARM and it's priced worse than a 30 year fixed. Anyone know of a good 1 year ARM out there? (Conventional)"