MBS RECAP: Decent Showing For Bonds Despite Strong Data
The rising rate trend of 2021 is increasingly being called into question–even if only temporarily–due to the inability of 10yr yields to quickly break above 1.75%. That said, at levels of 1.72-1.74% so far this morning, it’s definitely not time to celebrate just yet. Much of the global market is out on holiday. As such, we have yet to see the full reaction to Friday’s strong jobs report. The remainder of the week is fairly light in terms of calendar data, thus providing a glimpse of less adulterated trading motivations. Such weeks can end up being boring and sideways, but if we see a strong move down and away from 1.75% (or up and through–not the preferred option, but an option nonetheless) it would offer a strong comment on the state of the rising rate trend.
Econ Data / Events
Fed MBS Buying 10am, 1130am, 1pm
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 Recap
Fairly flat overnight with Asian markets leaving 10yr yields almost perfectly unchanged. After a few hours without any trading (EU markets closed), early domestic trading has been slightly weaker. Yields up 2.4bps to 1.74% and 2.5 UMBS opening 3 ticks (0.09) lower.
Steady gains for MBS this morning as Treasuries move mostly sideways. This outperformance in MBS could be viewed as simply as correcting the underperformance seen late last week. No major reaction to stronger ISM data. 2.5 coupons up an eighth. 10yr yields up 1.5bps at 1.73%.
Gains stalled just before the noon hour with MBS briefly up almost a quarter point. 10yr yields bottomed out at 1.700. Both have pulled back slightly since then. 10yr is unchanged at 1.713 and 2.5 UMBS are up 6 ticks (.19).
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