Bonds Find Footing After Shaky Start
This morning we found ourselves in the uncomfortable position of watching the bond market backtrack on massive gains at the end of the previous week. This is always a risk when the market goes on a big run--especially on a Friday. But rather than continue to erase Friday's gains, bonds found their footing in the 10am hour as a part of a broader "risk-off" move. MBS outperformed both due to a steeper yield curve and a technical rebound after last week's underperformance. In general, holiday week liquidity is a bigger problem for MBS than Treasuries, so the return of a normal business week is helping as well. In the bigger picture, the jury remains out until omicron-related risks are better understood.
Fed MBS Buying 10am, 11:30am, 1pm
Token bounce after Friday's big rally. Majority of gains remain vs Wednesday, but much weaker versus Friday. 10yr up 8.2bps at 1.564 and 2.5 UMBS down more than a quarter of a point.
Nice bounce since 10am with MBS almost back to 'unchanged.' 10yr up only 4bps on the day at 1.523 after being as high as 1.565.
Bonds continue to find footing through 3pm CME close. MBS still outperforming, now UNCHANGED on the day. 10yr yields are still 4bps higher.