MBS Outperform as Treasuries Hit Several Snags
In the bigger picture, the absence of any new rally momentum this morning meant that bonds were likely not quite ready to make any big decisions without seeing upcoming inflation data and next week's Fed announcement. That impulse was compounded by the ongoing Treasury auction process, a smattering of corporate bond offerings, and a modest rally in stocks that allegedly involved some big asset allocation trades (i.e. sell bonds to buy stocks). The net effect was heavy losses for Treasuries and moderate weakness in MBS.
Fed MBS Buying 10am, 11:30am, 1pm
Pending Home Sales -1.2 vs -1.6 f'cast, -4.0 prev
Chinese stocks staged another early recovery, but didn't reverse gains like y'day. This kept pressure on Treasuries until the EU open. Early domestic trading has been generally supportive. 10yr yields are 1bp higher at 2.74 and 4.0 UMBS, although showing an eighth of a point lower, are more like 1-2 ticks (0.03-0.06 lower) due to a last minute spike in prices setting a high bar for y'day's closing level.
Choppy and sideways at first, but losing ground now with 10s at the highs of the day, up 7bps at 2.799 and MBS down almost 3/8ths of a point.
Weakest levels just before the noon hour. Recovering since then as far as MBS are concerned. Treasury yields remain elevated.