Bonds were weaker overnight, weaker during the AM hours, and just for good measure, weaker again in the afternoon.  When the dust cleared, 10yr yields had risen nearly 9bps and Fannie 3.0 MBS were down more than a quarter point (Fannie 2.5 coupons more than half a point).  Surely, there must be something big and obvious to drive such a move!  Was it some sort of trade war tweet, a big central bank speech, or an important piece of econ data?

The 3 distinct stages to the selling would be our first clue that we were NOT dealing with one of those huge, singular, convenient, logical market movers.  If we could only blame one thing for today's pain, it would have to be "technicals."  That's saying something (for me, anyway) because I greatly hesitate to pin big market moves on technicals.  

This one is actually pretty logical.  For several weeks, both pundits and traders were sure they'd soon see a bond market bounce because yields had so quickly broken below 1.90% in early August.  Then they hit 1.595% the following week and SURELY, surely that must be the end of the crazy rally.  After 1.475% flashed the following week, you'd think lessons would be learned, but no.  Trump's decision to "order" US companies to bring operations back home fully erased a week and a half of potentially corrective momentum and reignited the bond market pain trade.

That was on August 23rd, and it wasn't until September 3rd that yields finally put in their most recent bottom.  By that point, trader sentiment surveys and reportable positions were in more and more agreement about yields continuing to fall.  That's JUST what the market needed for yields to begin rising again!  Long story short, bonds had finally made suckers out of almost everyone who saw how low rates were and bet on them rising.  Those investors quickly filled seats on a bandwagon of belief about rates continuing to move lower.  This, in turn, provided the market with a nice new population of victims for another contrarian trade.  

Sure, all of the above may be a bit too reductive and/or oversimplified, but it speaks to actual market forces that play out time and again.  Best case scenario, buyers will wake up and remember why they were buying last week.  Worst case, the year's low yields are behind us.  All we can do right now is follow the new uptrend in rates, currently in its infancy, but looking rather cranky.  

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
101-20 : -0-10
10 YR
1.6470 : +0.0970
Pricing as of 9/9/19 6:25PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
3:52PM  :  ALERT ISSUED: Negative Reprice Risk Increasing For Some Lenders
9:24AM  :  ALERT ISSUED: A Negative Reprice Is Possible, Even if Not Yet Likely

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "All depends on time frame, DR. There are new all-time lows in the future. Not sure how long we have to wait for that though. Best case scenario: a couple months. Worst case: more than a few years."
David Rudnick  :  "MG, if this is a correction... do you think the rates will drop back or you think this is the turning point. bottom hit. just your opinion"
Matthew Graham  :  "
New MBS Huddle Released
Is the 2.5 Coupon Curse Real?"
Gus Floropoulos  :  "the curse of the 2.5 is real"
Ted Rood  :  "Might wanna start calling those refi clients who procrastinated last week when I offered them 3.5%"