Flight to Safety Dominates While Escalation Threats Remain
The line of traders waiting to buy Treasuries is as long as the line of trucks waiting to invade Kyiv. As long as the world is convinced that things will get worse in Ukraine before they get better, bonds will remain well-bid. The overnight session saw 10yr yields fall as low as 1.714. They bounced modestly at the domestic open, but then went on a tear through the rest of the AM hours. 10s ultimately hit 1.682 and didn't bounce too much higher by the close. MBS gained half a point and mortgage lenders added at least that much to rate sheet pricing. All told, it made for one of the biggest 2-day drops in mortgage rates we've seen.
Fed MBS Buying 10am, 11:30am, 1pm
ISM Manufacturing 58.6 vs 58.0 f'cast, 57.6 prev
Prices 75.6 vs 74.6 f'cast, 76.1 prev
Sharply stronger overnight on Ukraine escalation. A bit of a bounce early, but 10yr still 4.5bps lower at 1.777. UMBS 3.0 coupons up 7 ticks (.23) at 101-09 (101.28).
Rally reinvigorated in early trading, especially after 930am NYSE open. 10yr down almost 10bps to 1.728 and UMBS 3.0 coupons up 14 ticks (.44) at 101-16 (101.50).
The rally continued into 11:45 with the invasion clearly driving trade at the time (oil, stocks spiked same time as bond yields tanked). 10yr hit 1.682 and is now up to 1.722. MBS are still up about half a point.
Bonds made another run at the best levels of the day, but have since given up some of the gains. MBS are still up 14 ticks (.44) and 10yr yields are still down 10.5bps at 1.71 (intraday low was 1.682).