MBS RECAP: In Line With Yesterday's Range After The Roll

Today was Class A 48-hour day for MBS, meaning that prices in the table below are outdated and have been replaced by July MBS prices going forward.  Both June and July MBS rallied today, but seeing as how we switch our frame of reference from June today to July tomorrow, prices on MBS Live currently show 103-03 in Fannie 3.5's (a rally from earlier lows of 102-15).  If we take today's closing prices in JULY MBS as the closing price for JUNE (now retired) MBS, the updated chart looks like this:

All things being equal, it's psychologically less troubling when we manage to rally enough on roll days that the longer term chart doesn't make a new low--better still when we rally enough to close in better territory than we opened (hence the green candle).  As for the trading day itself, it was almost all rally, all the time after opening up in significantly weaker territory.  The early weakness was most readily attributable to overnight central bank headlines concerning both the Bank of Japan and the ECB negotiations with the German Constitutional Court concerning ECB bond-buying (read more).  ECB members raised counterpoints to the restrictive implications overnight, and bond markets rallied back handily.  The next major consideration was the 3yr Note Auction, which went poorly and initially put significant pressure on the entire yield curve.  That pressure was soon interpreted as a knock on the short end of the curve, but a potential sigh of relief for the longer end.  30yr Bonds rallied best, and 10's were next best, gaining about half as much in terms of yield.  Disconcertingly, 10's still failed to close below the 2.18 pivot point broken yesterday, but markets are likely waiting for more guidance from the results of tomorrow's 10yr Auction and Thursday's 30yr.