MBS Live Recap: Breaking Down The Crazy Relationship of MBS, Mortgage Rates, and Treasuries

Bonds showed up to sell today--at least Treasuries did.  MBS, not so much!  That was the focus of the morning commentary and today's recap video offers additional clarification and detail for those seeking a deeper understanding. In terms of actually recapping today's market action, fiscal headlines were in focus after tradeflow-based weakness at the start of the day.  0.96% technical support generally held firm for Treasuries, but buyers were not eager to push back in the other direction.

Econ Data / Events
Market Movement Recap
08:19 AM

Bonds were roughly unchanged overnight, with a token rally during Asian hours followed by volatility and weakness in Europe.  Yields were near their overnight highs before the ADP data and dropped just slightly afterward.  The 10yr is down 0.6 bps at .923 and 1.5 UMBS are up 3 ticks (0.09).

10:59 AM

Powell and Mnuchin are talking to congress again, but Treasuries had already sold-off a bit after 930am NYSE open.  This further suggests the "new month" repositioning we discussed yesterday (i.e. traders' hands were tied for month-end positions on Monday, but the new month is bringing new momentum and "rotation" out of bonds and into stocks).

01:14 PM

Definitely some supportive vibes kicking in for Treasuries, but buyers aren't jumping in very aggressively, to say the least.  Let's call it: "less badness" as opposed to anything new and good just yet.  Yield highs of .959% remain intact since just after 10am this morning.  Multiple bounces near those highs.  Nice flat trajectory as well.  MBS hangin' tough near unchanged levels.  No reactions to any of the Fed speakers or stimulus headlines, unless we consider the unwillingness to embark on a bigger rally to be a reaction.

02:58 PM

Weakest levels, briefly, following upbeat stimulus headlines.  Bonds are now back in line with today's prevailing range after additional clarification on the stimulus headlines (i.e. not as much of a done deal as trading algorithms may have hoped).

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