MBS RECAP: decent viewing for bonds despite strong data
The rising interest rate trend of 2021 is increasingly – if only temporarily – being called into question, as the yields of 10 years are not able to break quickly above 1.75%. At 1.72 to 1.74%, it is definitely not time to celebrate this morning. Much of the world market is on vacation. So we have yet to see the full response to Friday’s strong employment report. The rest of the week is relatively small in terms of calendar dates and thus offers a glimpse into less bogus trading motives. Such weeks can be boring and sideways, but seeing a sharp 1.75% down and down movement (or up and down – not the preferred option but an option nonetheless) would make a strong comment on the state of the rising interest rate trend.
Econ data / events
Fed MBS purchase 10 a.m., 11:30 a.m., 1 p.m.
ISM Services PMI 63.7 vs 59.0 f’cast, 55.3 prev
Prices paid 74.0 vs 71.8, highest since 2008
Market Movement Review
Pretty flat overnight with Asian markets leaving returns nearly unchanged for 10 years. After a few hours of no trading (EU markets closed), early domestic trade was somewhat weaker. The yield increases 2.4 basis points to 1.74% and 2.5 UMBS open 3 ticks (0.09) lower.
Steady gains for MBS this morning as government bonds move sideways for the most part. This outperformance in MBS could simply be viewed as a correction to the underperformance observed late last week. No major response to stronger ISM data. 2.5 vouchers to one eighth. 10 years result in 1.5 bps at 1.73%.
Profits stalled just before noon and MBS briefly gained nearly a quarter point. 10-year yields bottomed at 1,700. Both have withdrawn slightly since then. 10 years is unchanged at 1.713 and 2.5 UMBS are up 6 ticks (0.19).
Discuss the MBS and mortgage markets on our streaming dashboard