MBS RECAP: Modest Gains Intact After Sharper Morning Rally

MBS saw their first trades of the day come in just a hair over yesterday's latest levels, which were also the best of the day.  They never looked back today, having held at least 2/32nds into positive territory even at their worst moments.  That was a fertile environment for stronger morning rate sheets, and the ongoing stability during the day made for few reprices (though the few seen were positive).

Heading into the 11am hour (seems like we've been saying that a lot this week... coincidence?) bond markets were rallying exponentially and charts began taking on that delightful "snowball buying" shape.  But the best levels of the day were in at 11:10, and everything moderated from there.  10yr yields made a calm, linear move back toward unchanged levels (they haven't gotten there yet--still down 1.6bps on the day).  MBS returned to morning levels more quickly and have simply held sideways in a narrow range since then.

For a market that's ostensibly hanging on every word out of Ukraine, this is pretty uneventful movement.  More likely, Ukraine headlines are providing a clearly supportive environment, helping to keep rates pinned down in the lower half of their 3 month range.  The narrowness and lack of steeper movement is most likely a nod to the importance of next week's events, which include an FOMC Announcement and Nonfarm Payrolls.