MBS CLOSE: Short Term Effect On The Bigger Picture

Feels like a lot of losses recently in MBS, doesn't it?  The series of moderately lower prices in MBS and an even worse picture for treasuries can certainly combine to deliver a bit of that bearish feeling (bond bear, not economy bear).

But what's the net effect after today's close?  4.5's down 6 ticks, but to what price?  100-27?  Man!  That price or prices very close to it sure seem to come up a lot recently.  And "recently" can stretch back as far as summer 2009 when that band of prices just under 101-00 capped every last day of that season.  Then those prices were supportive as we moved into the Fall and Winter.  WAS resistance, THEN support... Sounds like an inflection point...

And that would make sense heading into an exceedingly important guidance-giver like NFP, but only inasmuch as the treasury market confirmed that it too was at or near a similar inflection point.  Is it? 

Ummm.. Yeah.

With such a gorgeous--perfect even--exhibition of inflection from the 10yr this week, who even needs to debate the causality of market movements today?!  Was it earnings?  Pre-NFP Concession?  Supply?  Overnight events in Greek debt?  Stocks?  Who cares?

Well someone might care.  I might even care.  But the point is that the winner of the "Guess What's Moving Markets!" game today is the chart.  And even if you align the movement in the charts with a myriad of fundamentals, I'm sorry... Today is too good.  Ok, so what do I mean?  Pretty simple really.  You already know what tomorrow's MBS Close will read like right?  Something about "On an Epic Fence Ahead Of NFP?"  Sounds about right.   Long story short, the market is squaring up before NFP and it had some ground to cover to get to its MOST central and MOST flexible inflection point.

Toward what other yield could the 10yr yield have run and still say it's gone no higher since Mid-January and before then, no lower since Mid-December?  Make sense?  Nothing could be more equivocal--nothing more indecisive...  Nothing could say LESS about what to expect in the days to come! 

Looking at stocks over the same time frame, the portrayal is not quite as epic, but there's certainly SOMETHING to it...

So in the sense that this hasn't been as fine a line in the sand as the treasury inflection point, it's not so epic.  But scoring it plenty of points on the soon-to-be-trademarked "Epicness Scale" to earn a close second to tsy's would be the fact that stocks traded today around the exact same levels they did when treasuries were at that Mid-December inflection point.  Curious, no? 

Bottom line: don't fear the back up in tsy's as if it's making a fundamental comment on the future direction of rates.  Sure, everyone that ever mentioned the words "Technical Analysis" might be left below when the capital markets rapture happens, but until then, believe in the inflection and ye shall be saved (from jumping the gun on locking prematurely if we fail to move much above that inflection point tomorrow)