MBS RECAP: Bond Markets Happy With Lack of Surprises From Yellen

Bond began the first few minutes of the day in slightly weaker shape, but ended the day in positive territory after Yellen's congressional testimony and a strong 10yr Note auction.

Neither the weakness at the open, nor the strength at the close were much to write home about, but MBS did have a better afternoon than Treasuries.  Fannie 4.0s are up 7/32nds heading into the final hour and 3.5 coupons are up 10 ticks.  Keep in mind though, that tomorrow afternoon markets the 'roll' from May coupons to June, and the representative MBS Price will drop appreciably (usually somewhere between a quarter and three eighths of a point).

Even then, mortgage markets are clearly outperforming to some extent as rates are the lowest they've been since November.  In terms of assessing where markets might go, however, Treasuries are a more relevant technical tool, and although they're certainly much closer than they've been at any other time in 2014, they still haven't quite confirmed a true break below "the range."