MBS Live Recap: MBS Have an Underperformance Problem, But It's Complicated

MBS have a bit of a problem.  In the past week, they've gone on their weakest run versus Treasuries since the crazy volatility seen at the start of the pandemic.  The problem began with holiday-week illiquidity but shifted into higher gear early this week as Powell called for an accelerated taper schedule.  Today was actually decent in terms of underperformance, but in the context of the past 5 days, MBS are trading near their weakest levels while Treasuries are closer to their strongest levels.

Econ Data / Events
  • Fed MBS Buying 10am, 11:30am, 1pm

  • Jobless Claims 222k vs 240k f'cast, 194 prev

Market Movement Recap
08:35 AM

Slightly weaker Asia then slightly stronger in Europe, but not enough to fully erase overnight weakness.  Flat in the US so far with 10yr holding 2bps higher at 1.424 and UMBS 2.5 down 6 ticks (0.19).

12:09 PM

Progressively weaker since 9:30am with the last bout of selling bringing MBS nearly 3/8ths of a point lower and 10yr yields roughly 6bps higher on the day.

03:31 PM

Weakest levels of the day just after the last update.  Recovering/stabilizing since then.  MBS down 10 ticks (.31) and 10yr up 4bps (1.444%).

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