The new week wasted very little time in reinforcing the realities of 2021. This is a rising rate environment until further notice and any rapid correction toward lower rates will take some serious motivation. That motivation could take several shapes and if we're talking about a more temporary and moderate correction, it could be as simple as the hand-off from March to April (or Q1 to Q2) tradeflows. There are still several days to go on that front and today quickly became overwhelmed by corporate bond issuance and additional selling related to portfolio allocations for the end of Q1.
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Fed MBS Buying 10am, 1130am, 1pm
Modestly stronger during the first part of the overnight session. Quick, but moderate burst of selling pressure just before 4am, led by EU bonds. Treasuries gradually recovered prior gains to start domestic session down 3bps at 1.643. 2.5 UMBS are up more than an eighth of a point.
Noticeable weakness at 9:30am ET NYSE Open. 10yr yields now up 2bps at 1.696. UMBS 2.5 coupons down 1 tick (0.03) at 102-22 (102.69). Some buzz surrounding leaked internal proposal from White House for $3 trillion in new spending and $1 trillion in tax hikes (although the latter helps bonds).
Yields pushing new highs for the day, up 3bps at 1.703%. A hefty slate of corporate bond issuance continues to build for the week and that's adding to the pressure. MBS are outperforming with 2.5 coupons down only 3 ticks (.09).
More losses in the past hour with MBS getting more involved now. Lowest prices of the day for UMBS 2.5 (down 6 ticks or .19). Traders cite corporate issuance and portfolio re-allocations as motivations.
Modest recovery after 3pm, but too little and too late to change the tone of the day. Even then, 10yr yields are still up 3.6bps at 1.71% and 2.5 UMBS still down almost an eighth.
MBS Market Alerts
