MBS Live Recap: Powell Punts on SLR; Bonds Survive... Sorta

Today could have been much worse even though no one will look back on it as a great day for bonds.  We started out at the highest yields in more than a year after heavy-ish losses overnight.  After a healthy dose volatility, the 10yr was right in line with AM levels as the Fed announcement hit.  More 2-way volatility followed and it was ultimately up to Powell to set the tone. When asked about the SLR extension, he said an announcement would happen in the coming days.  Markets interpreted that as "something is better than nothing," but buyers didn't get carried away.  The rally brought Treasuries back to unchanged levels, and MBS into slightly stronger levels as of 430pm ET. 

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

  • Housing Starts 1.421m vs 1.56m f'cast
    Building Permits 1.682m vs 1.75m f'cast

Market Movement Recap
08:26 AM

Persistently weaker overnight after starting flat.  Sharper weakness at 7am following the trial result of another vaccine.  10yr now up 5bps at 1.67%.  UMBS 2.5 coupons down just over a quarter point.

11:50 AM

steady Treasury weakness since 1030am.  European bond markets leading.  May have seen a ceiling just over 1.68%.   MBS outperforming.  Bonds generally jittery ahead of Fed.

01:47 PM

Nice bounce back after EU close, although bonds remain weaker on the day.  MBS at best levels, down only an eighth now after being down more than a quarter point earlier.  

02:40 PM

Extremely volatile after Fed, but holding at the day's best levels as Powell begins answering questions

03:46 PM

A bit of sparkle is coming off the rally after a very nice intraday recovery.  10yr was as low as 1.62% but is back up to 1.644%.  2.5 UMBS are an eighth of a point off their highs but still very slightly stronger vs yesterday (but maybe not by the time you read this?  things are moving quickly).

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