In not so many words, most of the rate drama seen during the past 3 weeks is a result of a fairly important policy pivot from the Fed. There were no new Fed communications today, but some market participants were still responding to a slew of Fed speakers from Friday. Those responses were compounded by fear and uncertainty as the Fed is now in its blackout period before next week's announcement (no public speeches on policy in the 11 days leading up to an announcement). Left to their own devices, traders were free to panic.
Fed MBS Buying 10am, 11:30am, 1pm
NY Fed Manufacturing............ -0.7 vs 25.0 f'cast, 31.9 prev
NAHB Builder Confidence........ 83 vs 84 f'cast, 84 prev
Big losses in heavy volume overnight. Yields opened near 1.85% and have drifted down to 1.82 (still almost 3bps weaker on the day). MBS are down a quarter of a point.
After initial stability, bonds are back on the defensive. 10yr up to new highs for the day, +6bps at 1.854. UMBS 3.0 down nearly 3/8ths of a point.
Losses continued into the 1pm hour and we've seen a small amount of resilience since then. 3.0 UMBS were down more than half a point, but are now down just under half a point. 10yr yields up 5.5bps at 1.848.
The resilience evaporated at the 3pm CME close. New high yields for 10s and new lows of the day for MBS.