Another Solid Day; Detailed Discussion on 5.0 Coupons vs 7% Rates

Bonds are trading better than they have at almost any other time in the past few months.  The caveat is that they had to tag their highest yields in more than a decade 3 days ago in order to set the move up.  In that sense, the recent rally looks like the start of another range-finding expedition set to be resolved by a deluge of highly consequential data and events coming up next week.  Today's video discusses that and also has a detailed discussion about the logic behind following lower MBS coupons in a market where prevailing rates are associated with  much higher coupons.

Econ Data / Events
    • New Home Sales 
      • 603k vs 585k f'cast, 677k prev
Market Movement Recap
09:27 AM

Modestly stronger overnight, hitting best levels just after the EU open, then bouncing.  Once again, domestic traders have been willing to buy.  Near best levels in early stateside trading.  10yr down 5.2bps at 4.048.  MBS up roughly a quarter point.

11:52 AM

Gains continue through AM hours.  Some help from Bank of Canada announcement.  10yr down 8bps at 4.024.  MBS up roughly half a point.

01:19 PM

5yr Treasury auction was strong.  10yr yields at lows, down 9.1bps at 4.009.  MBS up just over 3/8ths of a point.   

02:59 PM

A bit of MBS specific weakness between noon and 2:15pm, but bouncing back a bit now.  Up 14 ticks (.44) on the day and 10yr yields are down 8bps at 4.021.

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