MBS RECAP: Holding Ground Despite Advancing Stocks, MBS Outperform

MBS Live: MBS Afternoon Market Summary

Today was a perfectly acceptable--even if low volume--Monday for bond markets.  Things were more quiet than usual right out of the gate with Japan and China out on Holiday.  European markets had less than their usual effect on Treasuries in the wee hours and domestic trading was surprisingly supportive in light of the rally to a new all-time closing high for S&Ps.  Low volume certainly creates the possibility for surprising movement and/or more of it.  We also have the technical break of the 1.68 level in 10yr yields acting as a potential pivot point as well as the second to last day of "month-end" buying opportunity for money managers (which can be a mildly supportive time for MBS, all things being equal).  Whatever the case, MBS were able to stand a bit taller than Treasuries today and noticeably outperformed into the afternoon.  Fannie 3.0's held a steady range just over 104-18--3 ticks higher on the day--as Treasuries turned negative.  Losses are relative though... with 10's in the 1.66's, they're still in better shape than almost all of last week and still underneath the potential 1.68 inflection point.

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