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MBS RECAP: Why Bonds Tanked After Powell (And Why It Was No Surprise)
Mar 4 2021, 4:19PM

From this AM: "some recent analysis has GREATLY overestimated the Fed's willingness to "twist.""  In simpler terms, there was some buzz about Powell saying the Fed might sell short-term bonds and buy more long-term bonds.  That buzz was silly this morning, and Powell confirmed the silliness by passing up 47 opportunities to say anything remotely indicative of twisty aspirations.  In other words, sorry long-term bonds... the Fed isn't going to save you.  The only surprise here today is the revelation of just how much of the bond market expected something else (as evidenced by the 1.47 to 1.54% sell-off following Powell).  SIGNIFICANTLY more detail and explanation available in this commentary piece and in today's video.

Econ Data / Events
  • Fed MBS Buying 10am, 1130am, 1pm

  • Jobless Claims 745k vs 750k f'cast

  • Factory Orders 2.6 vs 2.1 f'cast

Market Movement Recap
08:43 AM

Modestly stronger overnight with weaker vibes heading into domestic hours.  MBS just turned negative and Treasuries are heading in that direction (10yr -0.5 bps at 1.479).  Weakness is momentum driven and not a factor of the 8:30am data.

10:20 AM

Better buying since 9am.  It's not a runaway rally, but it reinforces yesterday's narrow range.  10yr down to 1.462 and 2.5 UMBS up just over an eighth on the day.

03:56 PM

Markets tanked so hard after Powell's speech that we're just now getting around to updating it!  In the meantimes, there were 4 alerts (1, 2, 3, 4), a huge explainer of a commentary piece, and an equally explanatory video.  The bond rout has subsided for now with 10yr yields 5bps higher and MBS down about 30bps.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
UMBS 2.5
103-12 : -0-12
10 YR
1.5470 : +0.0770
Pricing as of 3/4/21 4:16PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
12:30PM  :  ALERT ISSUED: Major Cliff Jumping as Powell REFUSES to Throw Markets a Bone
12:23PM  :  ALERT ISSUED: And Now Here's The Real Negative Reprice Risk
12:17PM  :  Bonds Bouncing Back Now!
12:13PM  :  ALERT ISSUED: Bonds Selling-Off as Powell Speech Begins
8:42AM  :  Just Barely Stronger After Data

Economic Calendar
Time Event Period Actual Forecast Prior
Thursday, Mar 04
8:30 Jobless Claims (k) w/e 745 750 730
8:30 Continued Claims (ml) w/e 4.295 4.300 4.419
12:05 Powell Speech / Q&A *
Friday, Mar 05
8:30 Non-farm payrolls (k)* Feb 182 49
8:30 Unemployment rate mm (%)* Feb 6.3 6.3
8:30 International trade mm $ (bl) Jan -67.5 -66.6
15:00 Consumer credit (bl) Jan 12.00 9.73

About the Author

Chief Operating Officer, Mortgage News Daily / MBS Live
A former originator, Matthew began writing for Mortgage News Daily in 2007, covering a wide range of topics. Seeing a need in the marketplace, his focus increasingly shifted toward relating MBS and broader financial markets for loan originators. ... more

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