MBS MID-DAY: Bonds Let Guard Down After no Yellen Bombshells

There are a lot of moving parts to today's movement, and most of them working in synergy to benefit bond markets.  The day began with Greece getting their list of reforms submitted to the Eurogroup overnight.  This made for a moderate amount of weakness as markets assumed it would be approved (because the fact that Greece was getting a sneak peak at how the document would be received is the only good explanation for their delay in submitting it yesterday).  The most important part of the market reaction was the fact that European bond markets continued to hold their supportive ceiling.

That paved the way for US bond markets to continue tightening back up to German Bunds--a process that began last Wednesday, but that got a healthy dose of confirmation yesterday.  All that remained was to rule out any negative surprises from Yellen's congressional testimony. 

As the testimony Q&A progressed, bonds inched into stronger territory, staging right on the important technical level at 2.04.  Milliseconds after Shelby began bringing the testimony to a close, bonds were off to the races, making today the strongest since late January.  10's are down to 1.99 and Fannie 3.0s are up nearly half a point to 101-27.

Bottom line: today's testimony was an important short-term motivation that played out against the more important backdrop of global bond markets.  If German Bunds had been freaking out this morning, we may well not be seeing this much positivity in US bonds markets.