This week has been one of the most surprising selling sprees in bonds in the post-covid era.  Just when you think we’ve surely seen enough selling to bring buyers in, it’s right back to new long-term high yields and significantly lower MBS prices.  That bounce is coming, to be sure, but it’s a risky proposition to bet on it.  Moreover, when it happens, it changes nothing about the broader trend toward higher yields that’s been intact for more than 6 months.  This week just happens to offer a more abrupt adjustment to the pace of that trend.

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Markit PMI Composite 58.8 vs 58.7 prev

  • Existing Home Sales 6.69m vs 6.61m f’cast, 6.65m prev

Market Movement Recap

08:28 AM

Treasuries opened modestly stronger in Asia, but 10yr yields failed at 1.28% again.  Steady-to-stronger data in Europe pushed yields higher heading into the domestic session.  10yr is up 1.4bps at 1.311% and 2.0 UMBS are down nearly an eighth.

10:25 AM

After an underwhelming attempt at a friendly bounce after 9:30am, bonds are on the back foot again and MBS are quickly down to new lows (and 10yr up to new highs of 1.336+).  There are no new market movers in play in terms of data or headlines (but big trades hit TSY futures at 10:08am and added to the weakness).

12:23 PM

1.338 ceiling held up against multiple breakout attempts but finally gave way a short while ago.  Yields are doing what yields do after a technical breakout (moving higher).  Currently over 1.35%.  MBS aren’t happy about it.  2.0 coupons are down 3/8ths and the increasingly relevant 2.5 coupons are down almost a quarter point.

02:51 PM

More minutes on the clock, more bond selling.  Highest highs of the day shortly after the last update with 10yr hitting 1.36+.  UMBS 2.0 coupons were as low as 101-16 (101.5) briefly.  Both have bounced modestly since then, but the damage is done as far as rate sheets and reprice potential are concerned.


MBS Pricing Snapshot

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.

MBS

UMBS 2.0

101-20 : -0-11

Treasuries

10 YR

1.3480 : +0.0610

Pricing as of 2/19/21 3:20PMEST

Today’s Reprice Alerts and Updates

1:18PM  :  ALERT ISSUED: If You Haven’t Seen a Reprice Yet, You Probably Will

12:10PM  :  ALERT ISSUED: Negative Reprice Risk Increasing

10:17AM  :  ALERT ISSUED: Negative Reprices Already A Possibility

8:35AM  :  Slightly Weaker After Another Failure at 1.28% 10yr Floor


MBS Live Chat Highlights

David Gaffin  :  “For what its worth it is doing serious damage to MY agenda”

Matt Graham  :  “but if they see rates doing damage to their agenda, then things could easily change”

Matt Graham  :  “Good question, but they don’t seem too concerned about rising rates for now. Moreover, they were exceptionally cool on the idea of YCC based on comments over the past few months”

David Gaffin  :  “MG- may have missed this discussion, but will the rapid rise in rates add ammunition for the Fed to use yield curve control in buying?”


Economic Calendar

Time Event Period Actual Forecast Prior
Friday, Feb 19
9:45 PMI-Manufacturing (Markit) * Feb 58.5 58.5 59.2
10:00 Exist. home sales % chg (%)* Jan +0.6 -1.5 0.7
10:00 Existing home sales (ml)* Jan 6.69 6.61 6.76

By Matthew Graham , dated 2021-02-19 15:22:42

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Courtesy of Mortgage News Daily

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