MBS RECAP: Bond Markets Defend Moderate Gains; MBS Underperform

MBS weren't quite able to keep up with the Snowball rally in Treasuries today, but the gap lessened into the afternoon.  Chalk this up to an abundance of Treasury-specific motivations in the morning hours, including ebbs and flows related to corporate bond issuance.

The more mainstream assessments of the day might make predominant mention of "weaker economic data" as a key factor in the strength.  While it's true the data was weaker (especially the NAHB Housing Market Index), hindsight shows the technical and tradeflow considerations were at least as big a motivation.  This is further corroborated by the divergence between stocks and bonds.

Tomorrow brings a meatier dose of data, with Housing Starts and Producer Prices at 8:30am, Fed speak from Bullard at 1pm and the Minutes from the most recent FOMC Meeting at 2pm.  The meeting itself didn't produce much drama in late January, and there's not a lot of speculation that the Minutes will be intensely interesting.  That said, official communications from the Fed always have the potential to surprise markets, so volatility can't be ruled out for tomorrow afternoon.