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MBS RECAP: Great Bounce After Auction. What Now?
Aug 11 2021, 5:32PM

We were hoping--perhaps even expecting (to some extent)--to see the recent uptrend in yields give way to period of correction either today or tomorrow.  "Period" is intentionally vague as we have no idea how long the good vibes will last.  All we know is that today was the day and the 10yr auction was the catalyst.  The video discusses the takeaways in greater detail.  The most important is that the strength of today's auction should not be taken as a guarantee of a swift recovery in rates as much as a suggestion that the recent selling trend should cool off.

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

  • Monthly CPI 0.5 v 0.5 f'cast, 0.9 prev

  • Core Annual CPI 4.3 vs 4.3 f'cast, 4.5 prev

Market Movement Recap
08:53 AM

Bonds slightly weaker in Asia, then flat in Europe.  Rallying back into positive territory after CPI data.  10yr down 1.2bps at 1.342 and UMBS 2.0 coupons up 1 tick (0.03) at 100-30 (100.94).

01:15 PM

After a slow, sideways grind for most of the day, bonds are surging after the 10yr Treasury auction.  Rather, they surged.  Yields bottomed at 1.302 and are at 1.320 currently (down 3.4bps on the day).  2.0 UMBS are up almost a quarter point.

05:14 PM

Bonds gave back a portion of the post-auction gains, but remained in positive territory through the close.  The back-and-forth was more pronounced in Treasuries whereas MBS retained most of the gains.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
UMBS 2.0
101-04 : +0-07
10 YR
1.3350 : -0.0070
Pricing as of 8/11/21 5:32PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
1:08PM  :  Incredibly Strong 10yr Auction. Bonds Rallying
8:43AM  :  Sideways to Stronger After CPI

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matt Graham  :  "but seriously, yeah, the day that I referenced yesterday where bonds push back against the recent uptrend. It is coming... whether today or tomorrow. If it goes beyond that, then the technical pattern in question no longer applies and we'll reassess."
Matt Graham  :  "And I would also say that I often intentionally use vague titles that force people to read a few sentences for context. Otherwise I get emails with people saying "you told me to float when you said we would see a ceiling!""
Matt Graham  :  "from y'day: Matt Graham: 8/10/21 7:42PM odds are we see a day or 5 of reprieve soon (starting tomorrow or the next day). By odds, I mean it's just slightly more probable than an ongoing sell-off--not enough that anyone but the risk-takin'-est risk takers would care. Speaking of risk, there is a risk that we just saw the big bounce (i.e. that the double bottom in yields in the last 3 weeks was as low as we'd go for more than few weeks, months, or possibly years). Any moderately sharp move up from the lowest rates since early 2021 should be considered as such until we have a more threatening economic risk than the delta variant. I would not be comfortable floating barely anything right now, even though my short-term forecast for rates would suggest otherwise."

Economic Calendar
Time Event Period Actual Forecast Prior
Wednesday, Aug 11
0:00 Roll Date - UMBS 30YR
7:00 MBA Purchase Index w/e 252.0 247.5
7:00 MBA Refi Index w/e 3684.3 3571.3
8:30 Core CPI (Annual) (%)* Jul 4.3 4.3 4.5
8:30 Consumer Price Index (CPI) (%)* Jul 0.5 0.5 0.9
13:00 10-yr Note Auction (bl)* 41

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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