MBS RECAP: Much Weaker After FOMC Minutes; Moderate Move in the Big Picture

The insidious thing about today's market movement--at least from the standpoint of MBS devotees--is that we began in moderately stronger territory and ended in moderately weaker territory, all inside a fairly narrow range in the bigger picture.  This makes things look pretty bad for anyone with their noses glued to the screens.  If we step back, we see that current levels are in line with (or slightly better than) Friday's latest.  In other words, even after today's weakness, we're still in better territory vs last week.

That said, the losses weren't insignificant, ultimately representing around 3/8ths of a point from most lenders' rate sheet print times.  As such, we saw most lenders reprice negatively, and FOMC-related reprices tend to be more forceful than average.

Why did the FOMC Minutes cause weakness though?  That's an exceedingly fair question as nothing of substance really changed from what we already know.  The passage getting the most attention is the bit about "a few participants raised possibility of rate rise relatively soon."  No one really knows what fairly soon means and no one assumes these "few participants" are anyone other than the few Fed members least affectionate toward accommodative policy. 

We've already heard from them, so it's not a major surprise, and the 2-3bp move in 10yr yields is consistent with the absence of major surprises.  We've also already heard more from Yellen herself at the recent House testimony and the data available to her by that time far outpaced that which was available for the FOMC meeting at the end of January (namely, another lousy NFP).  Perhaps markets were hoping to put 2 and 2 together between today's Minutes and last week's Yellen in order to support a more bullish conclusion and simply didn't see the right kind of combustible material.