MBS RECAP: Moderate Weakness But No Major Quarter-End Drama
Today is the last day of the month and quarter. That means more for financial markets than it does for many other sectors. While there is no hard and fast rule concerning timing, there is historically increased trading activity at the end of month (and quarter) as various types of money managers rebalance their portfolios or adjust their holdings to match underlying benchmarks. Read more about the Treasury/MBS specific month/quarter-end considerations HERE. In other news, Biden is expected to speak at 4:20pm ET today with more details on the infrastructure plan. This is late enough in the trading day that it’s more of a consideration for tomorrow (and even then, most of the details have already trickled out).
Econ Data / Events
Fed MBS Buying 10am, 1130am, 1pm
ADP Employment 517k vs 550k f’cast, 176k prev
Pending Home Sales -10.6 vs -2.6 f’cast (-0.5 y/y)
Market Movement Recap
Little-changed after ADP despite noticeable volume surge. Slightly weaker overnight. Currently up 1.3bps in 10yr at 1.723%. MBS are down 2 ticks (0.06).
Fairly quiet overall with modest gains heading into the end of the EU session (noon ET). MBS, specifically, improved just after the 10-10:20am Fed buying operation, which is interesting considering it was GNMA not UMBS. 2.5 UMBS are at the best levels of the day, up 3 ticks (.09) at 102-22 (102.69). 10yr yields are unchanged at 1.71.
Coming off better levels now. Heaviest volume of the day–assumed to be month/quarter-end tradeflows, but not a ton of volatility to show for it. 10yr yield up 2bps at 1.73% and UMNS 2.5 coupons now unchanged on the day (down 0.09 from the highs)
3pm has come and gone without much ‘month-end’ fanfare. The weakness leading up to the 3pm close was already ramping up as of the last update, but yields did indeed top out right at 2:59pm ET. They’re now back down to 1.73% again and UMBS 2.5 coupons are back to unchanged levels.
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