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MBS RECAP: Bigger Picture Bounce Becomes Bigger Risk, But Not The only Risk
Aug 6 2021, 3:56PM

Friday's strong jobs report certainly deserves some credit for increasing the risk that the Fed considers an earlier tapering timeline (as early as the September meeting if we see another similar report next time).  But "another similar report" isn't a given.  Ample uncertainty remains due to the current covid spike, and seasonally abnormal employment patterns being viewed through the lens of normal seasonal adjustments.  Nonetheless, the downtick in the unemployment rate needs to be respected and we need to be ready to asses whether bonds are looking more interested in a sideways, "wait and see" approach next week or if today was just the first day of a bigger picture breakout.

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

  • NFP 943k vs 870k f'cast, 938k prev

  • Unemployment 5.4 vs 5.7 f'cast, 5.9 prev

Market Movement Recap
08:16 AM

moderately and steadily weaker overnight in higher than normal volume.  The move was very linear, without any major reactions to individual events, thus suggesting more pre-NFP position-squaring.  10yr yields up 2.5bps at 1.25% and MBS down almost an eighth of a point.

09:40 AM

Post-NFP sell-off hit the supportive ceiling at 1.29 and has flatlined since then.  Bonds could be consolidating for another move higher in yield, but have to wait and see.  MBS holding steady 6 ticks lower (-.19).

12:40 PM

Treasuries are still trying to hang on to the 1.29% ceiling (or close to it), but MBS have leaked lower.  2.0 coupons at new lows, down almost 3/8ths on the day and more than an eighth from rate sheet time.

03:54 PM

Nothing that happens in the last hour will really matter in the bigger picture.  Bonds effectively held sideways at the weakest levels of the day for the entire afternoon.  MBS are down 3/8ths and 10yr yields are up 7.4bps at 1.299%.


MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
UMBS 2.0
101-13 : -0-12
Treasuries
10 YR
1.2990 : +0.0820
Pricing as of 8/6/21 3:56PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
12:23PM  :  ALERT ISSUED: Slight Increase in Negative Reprice Risk (Despite TSY Resilience)
11:03AM  :  ALERT ISSUED: MBS Slipping; Reprice Risk Varies
8:33AM  :  ALERT ISSUED: Nonfarm Payrolls Crush It; Bonds On The Run

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Timothy Baron  :  "Ok, MBS. How about a bounce?"

Economic Calendar
Time Event Period Actual Forecast Prior
Friday, Aug 06
8:30 Non-farm payrolls (k)* Jul +943 870 850
8:30 Unemployment rate mm (%)* Jul 5.4 5.7 5.9
10:00 Wholesale inventories mm (%) Jun 1.1 0.8 0.8

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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