MBS RECAP: Serious recovery after the morning drama
“Drama” may be a bit of an exaggeration, but bonds were weak enough this morning to raise some concerns about the prevailing message of the week (that is, the upward trend in rates for 2021 is heavily considering releasing the month in April). During the day, yields fell towards lower levels. While Treasuries ultimately failed to return to positive territory, MBS did. The outperformance is due to the slight MBS offer in the last 2 days as well as the Treasury-specific headwind (such as the shortened auction cycle of the next week).
Econ data / events
Fed MBS purchase 10 a.m., 11:30 a.m., 1 p.m.
Core producer prices (year-on-year) 3.1 vs 2.7 f’cast, 2.5 prev
Market Movement Review
Much weaker overnight in an obvious confirmation of a sideways trend (i.e. not a rally trend). 1.62% retained in 10 year yields. After a big run up we are at 1.68% this morning. With 2.5 coupons, MBS only exceeded 6 ticks (.19) to 103.00. Inflation data delayed due to issues with BLS website.
Decent rebound from 9am. The move coincides with a surge in stocks – a refrain common in recent months that continues to suggest money managers are getting in and out (and back in) on both sides of the market. 10 years now only 2.7 bps at 1.653 and 2.5 UMBS only 2 ticks (0.06) per day.
The MBS are now almost unchanged again, although the yields on government bonds are rising again to a somewhat weaker level. 2.5 UMBS are down 1 tick on the day to 103-05 (103.16) and 10 year yields are up nearly 3 basis points to 1.655%.
Bonds shied away from a full dip in positive territory as yields gradually rose over the past 3 hours. The 10-year yields are up 3.6 basis points again on the day at 1.662, and the UMBS 2.5 coupons are down 3 ticks (0.09) after briefly turning positive on the day just before noon.
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