MBS RECAP: Not a Bad Day, But We Need More Convincing
Rates have tried to convince us that the worst is over on several occasions in the past few months. First it was 1.18%, then 1.38%, and most recently 1.63% (all in terms of 10yr yields), but all of those would-be ceilings quickly gave way to more weakness. 1.75% is now singing the same tune. While it’s true that odds improve slightly with each new ceiling, it’s also true that we’d need to see better and more sustained gains before getting too optimistic about a more significant reprieve.
Market Movement Recap
Bonds moderately stronger out of the gate during Asian hours with some buzz over Turkey’s Erdogan firing the country’s central bank chief. 10yr yields were down roughly 4bps by midnight and have held those gains through the start of the domestic session. UMBS 2.5 starting out up roughly 6bps (+.19).
Bonds are holding moderate AM gains and Treasuries have extended the rally just a bit with 10yr yields down 5bps to 1.682%. 2.5 UMBS are underperforming slightly, but still up more than an eighth of a point.
MBS getting caught up with Treasuries after earlier underperformance. 2.5 coupons now at best levels, up more than a quarter point on the day at 102-17 (102.53). No specific motivations. Treasuries have been flat for more than 2 hours at 1.68%.
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