MBS LUNCH: Bonds Slightly Improved Across The Board

After more volatile morning movements, MBS have improved in a very narrow range into the afternoon with the 4.5 up 3 ticks from Friday's close to 101-19.  Closing at this level would constitute an all time high.

Tsy's meanwhile had been negative almost all morning, but as you can see in the chart below, 10yr yields broke through 3.215 and used that same level as support to make an assault on the lowest yields since May at 3.20.  If yields find reason to drop below 3.2, there wouldn't be any informative resistance until May's low at 3.12.  As such, we wouldn't expect to see a meaningful push lower in yields into the 3pm marking

Stocks have continued to "play ball" with bond rallies with both the S&P and Dow slightly negative on the day.  The S&P had gone as high as 1097 this AM, but tsy's have been calling the shots as that move did little to phase the generally downward momentum in tsy yields.  Stocks have extremely important support at 1087 and true to that claim, 1087 staved off equities' move lower into the noon hour.  1087 is the lowest stocks have closed since the most recent rally cycle began at the turn of the month. 

The 2nd dip only brought the S&P to 1091, so with that same level (1091) acting as intraday resistance, it's a good sign for the rest of the day in bonds.  Or more appropriately, it's the ABSENCE of a BAD SIGN.  Still, that may not matter much on a month-end Monday that kicks off NFP week as a majority of volume will be waiting for it's next clue until Friday's top shelf Jobs Report.

Any way you slice it, MBS are dancing around their all time closing highs for a 2nd day now, but this time it's on a Monday of a full, non-holiday encumbered week with roughly average MBS volume.  As such, reprices for the better are a distinct possibility, and at these levels that should make the possibility equally distinct that you'll want to lock the closer rate sheets get to "too good to be true."