Treasuries Slide Sideways as MBS Outperform
The most notable development today was the outperformance on the part of MBS. The most obvious culprit would be the looming Treasury auction cycle logically causing more anxiety for Treasuries. There's also the distinct steepening of the yield curve, which tends to favor MBS when it's happening in moderation. Additional factors are discussed in today's video, but ultimately don't really have a bearing on the bigger picture.
Fed MBS Buying 10am, 1130am, 1pm
Existing Home Sales 5.99m vs 5.83m f'cast, 5.87m prev
Markit Composite PMI 55.4 vs 58.3 f'cast, 59.9 prev
Slightly weaker overnight in light volume. 10yr up 1.3 bps at 1.27% and UMBS down 2 ticks (0.06).
Modestly positive momentum throughout the AM hours. Treasuries are now unchanged at 1.255 and MBS are 2 ticks higher (+0.06) at 101-10 (101.31).
MBS outperformance continued as Treasury buyers were hard to convince on the Monday of an auction week. 2.0 coupons up more than an eighth of a point while 10yr yields are merely unchanged.