MBS Live Recap: Strong Showing With Help From Vaccine Drama and a Solid Bond Auction

The day began with bonds falling back to yesterday's range after rising in the overnight session.  Concerns over the J&J vaccine were in focus.  Inflation data (CPI) came out stronger than expected, but bonds took it in stride, ultimately rallying back into positive territory within 10 minutes of the data.  The day's biggest ally was yet to join the fight, but when the 30yr bond auction results came out, its allegiances were clear.  Even after a morning of modest gains, the auction still managed to post strong results, thus adding solid reinforcement for the current consolidation pattern.

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

  • Core Annual CPI 1.6 vs 1.5 f'cast, 1.3 prev

Market Movement Recap
07:51 AM

Bonds opened slightly weaker with comments from Bank of Japan's Kuroda kicking off a move up to 1.703% in 10yr yields.  Bonds were sideways in Europe until rallying at 7am ET on news of the J&J vaccine being suspended.  Big volume spike and a quick drop to 1.661 at the time.  Now back up to 1.682%.  NOTE: MBS chart looks worse than it is due to the roll.

08:40 AM

CPI higher than expected (core, y/y +1.6 vs +1.5 f'cast).  Perhaps bonds were braced for worse.  They've rallied since the data with 10yr yields turning green at 1.664% and 2.5 UMBS up 2 ticks (+0.06).  

11:36 AM

MBS now up more than a quarter of a point with 2.5 coupons trading at 103-06 (103.19).  10yr yields are down 1 bp with gains most easily attributed to J&J vaccine news.

01:06 PM

Very strong 30yr auction, especially in the context of an already stable-to-stronger morning. 10yr yields down 4bps now at 1.63%.  UMBS 2.5 coupons at highs of day, + 10 ticks (.31) at 103-07 (103.22).

03:51 PM

Holding steady near the best levels of the day.  Not much has happened since the auction.  10yr still blocked by 1.62% underfoot, but no complaints about a 4bp drop on the day.  2.5 UMBS are now 3/8ths higher on the day.

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