MBS MID-DAY: One of the Craziest Days for Bond Markets, Ever

If you're just tuning in, bond markets are having a career day with 10yr yields currently operating near 2.06 after trading in the 2.2's yesterday and 2.4's last week.  Fannie 3.0s (those are important again now) are up a point and 3.5s are up 20 ticks.  Best-ex rates are easily into the high 3's.  Wow...

Today isn't going to break any records in terms of absolute movement.  Clearly, we've seen bigger moves in the past, but we must also consider the context.  For instance, bond markets were making bigger swings lower in yield in 2011 and 2008/2009, but the circumstances were quite different.  In both of those cases, we had clearer motivations.  In 1987, yields certainly dropped more in a 2 day period, but there again, that followed a massive sell-off and the drop was part of the reversal process.

This time around, the massive rally comes in the MIDDLE of an ALREADY-ESTABLISHED rally.  Treasuries were already pushing overbought levels by the time yields hit 2.4 last week.  To drop another 54bps to 1.86 (intraday today) considering those circumstances is more or less unprecedented.  Here are some fun facts:

• Biggest volume day in treasury futures since the start of the financial crisis (surpassed at 1:30pm).
• Biggest swing to overbought levels in many technical indicators.
• Biggest rally day since mid 2011.
• Biggest intraday rally since March 2009 stock crash.