MBS RECAP: Post Fed Sell-Off Keeps Taking Measured Steps

Ongoing, firm, measured selling efforts are exactly what we would expect from a market that was caught somewhat off-guard by last week's FOMC Announcement.  The risk of a December rate hike obviously had to be repriced with the Fed specifically mentioning the possibility in the announcement.  All of the trading between now and then seems to have merely served that underlying theme.  Bonds have sold whether stocks have been up or down.  They've sold when data has been good or bad. 

There wasn't any meaningful data today, but that didn't matter.  Bonds sold steadily.  It was like they were given the end-of-day target at the beginning of the day and told to get there slowly but surely.  By the end of the day, 10yr yields were near the highs at 2.22 and Fannie 3.0 MBS were down just over a quarter point at 100-25.   Market participants are likely more than a bit cautious about 3 speeches from key Fed officials tomorrow, which may or may not clarify/reinforce the messages in last week's official statement.