MBS RECAP: Fight Good Fights, Wait On Fed Day
After a pretty rough Friday late last week, it’s slightly comforting to start the new week without any additional harm. But, as has been the case for weeks, these resilient episodes are noticeably lacking in bullish confirmation (i.e. we are not selling out, but we are not rallying in any meaningful way). Taking away is easy: it’s an environment of increasing rates until proven otherwise. If an event has the ability to change the tone of trading on bonds that week, it will be the Fed’s announcement on Wednesday for reasons discussed the next day.
Econ data / events
Fed MBS purchase 10 a.m., 11:30 a.m., 1 p.m.
NY Fed Manufacturing 17.4 vs 14.5 f’cast, 12.0 prev
Market Movement Review
Pretty flat overnight with initial weakness giving way to a rally in Europe. Both were small. Sold a little better in the last hour. 10 years is completely unchanged at 1.625. UMBS is still finding liquidity but is also close enough to stay unchanged.
More decent gains towards the end of the European session. France’s suspension of Astra Zeneca vaccine is in line with the rally, but it’s hard to tell if it’s the source. 10 year return now almost 3 basis points at 1,597. UMBS 2.5 coupons by an eighth.
To give up some of the gains after the EU bond market closes. Nothing too dramatic and MBS / Treasuries are both still in slightly positive territory (UMBS + 0.06 and 10 years down 2 basis points to 1.604).
After the CME closes at 3 p.m., the uneventful bubbling continues. Treasuries are 2 basis points lower on the day and UMBS 2.5 coupons are nearly unchanged.
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