MBS MID-DAY: Rally Pulls Back After Fuel Dries up

It's been a pretty simple trading session.  Overall, participation remains much lower than normal, but has picked up from Friday's levels (which were the lowest of 2014).  Much of the increased activity was a factor of an even busier trading day in Europe. 

Greek parliament failed to elect a new President, thus necessitating a new national election.  Markets knew this was a risk, but it wasn't a sure thing.  The frontrunner in the new national election is Tsipras, who's not a fan of EU-imposed austerity measures and whose brinksmanship almost forced a Greek Eurozone exit in 2012.  Expectations have been drifting toward a similar outcome this time around.

The market-based results are similar as well with German Bund yields reaching a new record low today.  Treasuries followed the direction of the move (lower in yield), but only halfheartedly.  Once European markets closed for the day, US bond markets (including MBS), reversed course and are now back in line with opening levels.  Thankfully, opening levels were moderately stronger than Friday's closing levels, but only be an eighth of a point in MBS.