MBS RECAP: Bond Markets Go out at May's Best Levels

It came right down to the wire.  The best 3pm closing level for 10yr yields was previously seen on May 1st at 2.117.  We hovered near those levels for much of the day today, but ultimately hit 2.095 by 3pm.  Even though bonds continue to trade until 5pm, most market participants regard 3pm as the close of business.  Most charting software treats 3pm levels as closing levels, and most analysts/strategists publish their end-of-day wraps just after 3pm. 

There's a very good reason for this.  The hours at the Treasury pit at the CME run from 8:20am to 3pm (or 7:20am to 2pm local time).  This is why we often see tradeflow fluctuations at those times. 

When it comes to month-end, there's an even bigger glut of last-minute business to attend to, and it can make for a noticeable amount of volatility.  This was the case today as the last trades of the month were squared up in the final moments leading up to 3pm.  After that, the combination of lighter liquidity and opportunistic traders taking advantage of core participants' departure took a modest toll.  10yr yields rose from 2.095 to 2.127 in fairly short order, but that was the extent of the damage.  MBS were able to hold just above their key support levels (101-08 in Fannie 3.0s and 104-12 in Fannie 3.5s) mentioned in today's first MBS Live update as good levels to watch for reprice risk.