MBS RECAP: Participation Returns and Votes in Favor of Range

Market participation was pathetic yesterday--the lightest session since at least April.  Today was merely "average" but that's a huge improvement over yesterday. 

As markets regained a pulse, it beat steadily toward lower bond yields--thus confirming the bounce off 2.66% 10yr yields. This started in Europe as weak economic data helped EU debt rally and hurt stock averages in relative lock-step. 

Treasuries followed all of the above and US equities joined in more noticeably after the 930am stock open.  Everything moved lower together (stock prices and bond yields) through the close of the European session at which point the markets remaining open simply leveled-off or reversed.

This isn't to say that Europe is/was the only reason US bond yields and stock prices fell today, but it is certainly to say that it was enough to tip the scales in that direction.

MBS were NOT able to keep pace with the rest of the move and Fannie 3.5s are heading out only 6 ticks higher vs a 16 tick gain in 10yr Treasury prices.