Snowball Rally Reinforces Post-Payrolls Opportunities
Last week's jobs report created an opportunity to ride whatever sort of wave of positive momentum we may have seen in the present week. After a noncommittal start yesterday, today's session delivered. An early short squeeze pushed 10yr yields more than 5bps lower and bonds didn't lose much of that by the end of the day. MBS reluctantly improved as well, despite significantly underperforming vs Treasuries.
Fed MBS Buying 10am, 1130am, 1pm
Big bond rally starting in the 6am hour on internet outages, but accelerating in the 8am hour on friendly Bank of Japan talk and a general short squeeze. Big block trades contributed to the momentum.
Treasuries have cooled off in a more sideways sort of way with 10yr yields hugging the 1.53% technical level. MBS have underperformed a bit, with a more linear trend of weakness from the AM highs (off an eighth since 8:30am, but still up an eighth on the day).
It looked like bonds were cooling off for the day and that there may have even been some risk of a negative reprice situation as far as MBS were concerned, but we got a friendly bounce after EU markets closed. MBS are up more than an eighth in 2.0 coupons and 10yr yields are down 4.3bps at 1.526.