MBS Only Slightly Better While 10yr Shines
As discussed in the day ahead, the bond market is in the midst of repricing its assumptions about the yield curve after Wednesday's Fed forecasts. Rate hike size and timing is being given just a bit more respect, and previous trades betting on a steeper yield curve are quickly covering. That translates to losses in 2-3yr bonds and gains in the longer end of the yield curve. Bottom line: longer-lasting bonds are doing the best. MBS don't last as long as 10yr Treasuries so they're not doing as well. The end.
Fed MBS Buying 10am, 1130am, 1pm
Stronger overnight with 10yr revisiting yesterday's lowest yields around 4am. Weaker at the start of the domestic session (back to unchanged) after Bullard comments on CNBC.
Wild morning, relatively, with big dip in MBS followed by an even bigger recovery. TSY yield curve going nuts with 2s in the toilet and 30s to the moon. See the Day Ahead for more. There are no obvious catalysts for the 10am rally in the long-end of the yield curve.
Slow grind toward stronger levels over the past 4 hours (just as easy to call MBS "sideways"). 2.5 coupons are up 2 ticks (0.06) on the day and 10yr yields are near their lows of the day down 6.8bps at 1.443%.