MBS Begin Week Sideways to Slightly Improved
MBS opened today just over the well-travelled 103-10 pivot point and moved higher to hold a sideways range around 103-16 since 10am. Volume has been on the light side and few market movers have spoken loudly enough to cause much of a stir. 10yr yields revisited Friday's strongest levels briefly, but have since been pulled higher in a few small bursts of selling due in part, to an active slate of new corporate debt issuance.
Corporate issuance can create some relative challenge for Treasuries both due to corporates, in some cases acting as a supplement to TSYs, thus sapping some TSY demand, as well as the very common "rate-lock selling" where issuers of corporate bonds sell TSYs in order to lock in their margin when the corporate issuance is priced. Given those TSY-specific price pressures, it's not too much of a surprise to see MBS somewhat insulated from "the red" in the Treasury complex.
(source: MBS Live Dashboard)
The chart above might make it seem as if MBS and Treasuries have been somewhat volatile over the past two sessions. But when we consider the relative narrowness of the ranges (a mere quarter of a point in MBS and a scant 4bps in 10yr yields), things are actually rather sideways in the big picture. Case in point, the most recent clump of trading in the chart below is the past two sessions. The chart also highlights the next two pivot points higher and lower from current levels (103-18 and 103-23 on the upside, 103-10 and 103-00 on the downside).
Treasuries recent moves have been in a similarly narrow range, and have occurred near the center of the range that has been intact since February's NFP.
To take the them of "narrowness" a step further, check out 10yr yields versus stocks since August 2011. Treasuries have basically been doing their best to get flat just under the 2% mark, and have done an increasingly good job of that, especially since November 2011. Stocks on the other hand, have been extremely directional, especially from mid-December.