Monday's half-day brought 2018 to a strongly positive conclusion for bonds.  Today's full session picked up where Monday left off and then some.  By the end of the day (after the 3pm CME close) 10yr yields were more than 5bps lower at 2.633%.  Fannie 4.0 MBS cracked above 102-00 for the first time since May 2018.

There were no overt motivations for the gains in terms of the usual suspects (econ data, news headlines, etc.), although analysts attempted to make a few claims to the contrary.  The best explanation is that this is simply the way things played out with respect to trading positions in the new year.  The fact that bonds were willing to diverge from stocks only adds to that case (i.e. bonds had their own agenda regardless of what stocks were doing).

The only exception worth discussing is that of the European bond market's role in today's gains.  German Bunds surged lower right out of the gate at 3am E.T. and Treasuries followed in relative lock-step until ultimately breaking away at the 8:20am CME Open.

MBS underperformed radically, but they should be ready and willing to pick up that slack as soon as Treasuries stabilize.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 4.0
102-02 : +0-03
10 YR
2.6330 : -0.0580
Pricing as of 1/2/19 5:54PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
11:26AM  :  Slight Negative Reprice Risk as Stocks Surge

Economic Calendar
Time Event Period Actual Forecast Prior
Thursday, Jan 03
8:15 ADP National Employment (k)* Dec 178 179
8:30 Jobless Claims (k) w/e 220 216
10:00 Construction spending (%)* Nov 0.2 -0.1
10:00 ISM Manufacturing PMI * Dec 57.9 59.3
10:00 ISM Mfg Prices Paid * Dec 58.0 60.7