MBS RECAP: Brave effort, but this week’s bounce-back effort falls short
To hit an insult, an injury? Oh, are you already known ?! Of course you are … It’s 2021 and we’re finally talking about the bond market. Just over 24 hours after bonds were supposed to maintain a friendly trend all week, we close near the week’s weakest levels and strongly disapprove of a break below 1.62% (a level that appears to be a good line in the sand for a stronger rally serves prospects). Most frustratingly, there are no obvious scapegoats for today’s price action – just a general 2-day trend starting from yesterday morning’s low yields.
Econ data / events
Fed MBS purchase 10 a.m., 11:30 a.m., 1 p.m.
Annual core PCE 1.4 vs 1.5 f’cast, 1.5 prev
Consumer sentiment 84.9 vs 83.6 f’cast, 83.0 prev
Market Movement Review
Bonds weaker overnight with losses focused on European hours (mostly stronger data). We could also call this a rejection of a break below 1.62% in 10-year returns. In both cases the losses are only “moderate” to date and we are still a long way from Monday’s highs of 1.70+ (currently 1.665%). MBS are less than an eighth. Minimal positive impact from PCE data (slightly weaker core inflation).
Bonds push a little more against the weakness overnight, but progress remains slow. 10 years result in only 1.6 basis points at 1.65% and 2.5 UMBS only 1-2 ticks depending on the moment (-0.3 to -0.06).
The morning rally ended shortly after 11 a.m. No specific reason. MBS corrected a little more abruptly than Treasuries, but both have stabilized in the past few minutes. UMBS 2.5s are only down 1 tick on the day and 10 year yields are only up 1.6 basis points at 1.65%.
More sales … really stable all day, despite a short break from 10 a.m. to 12 p.m. Returns at daily highs. MBS prices at lows. No new specific motivation. Very linear 2-day trend. Apparently, bonds only stick to the script.
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