MBS RECAP: One Of The Flattest Days in Recent Memory

Bond markets were sharply sideways today, especially MBS.  That said, the sideways trading was only seen during the domestic session.  Before that, bond markets were noticeably weaker through the overnight trading hours.

The first source of inspiration was Yellen's late speech from yesterday.  It was out right as bond markets closed, thus making for a delayed reaction.  Bond yields popped higher right at the start of Asian hours but managed to hold flat until European hours.  Surging stocks only translated to moderate additional weakness in bonds.  The morning selling in Treasuries had the look and feel of early domestic traders closing out bullish bets after waking up to the highest opening yields of the week.

After the early selling pressure, bonds completely redefined the notion of flatness.  This was especially apparent in MBS where Fannie 3.5s traded between 103-25 and 103-27 for all but the first hour. 

GDP data was a non event, and news headlines regarding the Boehner resignation also failed to sway bonds from their sideways path.  By the close, it was another day with a moderate net-change leaving us well within the old, boring range that we'd hoped would have been broken by last week's Fed Announcement.  Maybe we can rekindle those hopes for next week's NFP?