As far as the Fed is concerned, bonds don't have to stress out about rates rising too terribly quickly right now. Granted, they can only directly control the shortest-term rates, but they just pledged to keep buying as much of the longer-term stuff as they have been. MBS and Treasuries appreciate it, to say the least.
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11:30-11:50 AM (ET) - Fed 30yr UMBS Buying
Treasuries flat during Asian hours, then rallied during European hours. 10yr yields bounced at .79% just after 6am and are up to .804% to start the domestic session. MBS are opening slightly weaker, but have yet to find liquidity. Note: prices will be visually lower on the chart due to the roll.
Bond yields followed stock prices lower at the NYSE open, and MBS came along for the ride with modest gains. Treasuries are still down 4.8bps at .78, but MBS have slipped into an illiquid "mystery price" mode again with buyers and sellers on different planets. 2.0 MBS are indicated +2 ticks (0.06) on the day, but are likely just a bit stronger by the time liquidity improves.
Yields spiked briefly and inexplicably after the Fed, but have no returned to pre-Fed levels. MBS are at the best levels of the day. Fed committed to continuing purchases at a pace that at least matches the current pace.
Bonds have thought things over and decided the Fed's message is an unequivocal buy signal. 10yr yields are down more than 7bps at .754. UMBS 2.0 coupons are skyrocketing, relatively, up more than 5/8ths of a point on the day.
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