Solid Gains Despite MBS Underperformance

US Treasuries had a tough time digesting auction supply last week, but have been nothing short of enthusiastic since then.  This isn't to say the auction cycle was the biggest market mover in the past week.  After all, there were logical reactions to economic data.  Rather, we're attempting to reconcile the underperformance in MBS at the start of the week.  In addition to the ebbs and flows surrounding the auction cycle, outperformance of the long end of the yield curve also commonly causes a bit of a lag in MBS.  As for today's data, it was all about ISM Manufacturing which came in with a weaker headline and a lower "prices paid" component. 

Econ Data / Events
    • S&P Global Manufacturing PMI
      • 51.3 vs 50.9 f'cast, 50.0 prev
    • ISM Manufacturing PMI
      • 48.7 vs 49.6 f'cast, 49.2 prev
    • ISM Prices Paid
      • 57.0 vs 60.0 f'cast, 60.9 prev
Market Movement Recap
09:46 AM

No major reaction to PMI data.  MBS up 3 ticks (.09) and 10yr down 3.8bps at 4.46.

10:06 AM

10s are now down 8bps on the day at 4.418 and MBS are up at least 6 ticks (.19)--possibly more by the time liquidity improves.

03:04 PM

MBS perfectly flat at highs, up a quarter point.  10yr near best levels, down 9.5bps at 4.403.

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