MBS RECAP: Uneventful Visit to Weakest Levels in Months

Bond markets kept on doing what they've been doing every day so far in November: selling-off.  Actually, if you'd like to look at it in slightly more positive terms, you could say that we're in the midst of "repricing a Fed rate hike."  It just so happens that said "repricing" is accomplished via the aforementioned sell-off. 

Today's was much gentler than Friday's, which had the big impact from the ferociously strong jobs report.   In fact, today's weakness might even have looked a tad resilient.  Reason being: there was a significant amount of corporate bond issuance, with over $15 billion hitting the market today alone.  Add that to the similarly busy day on Friday, and you have a meaningful addition to the week of Treasury debt supply (3, 10, and 30yr auctions).  The fact that bond markets are closed on Wednesday only compounds the supply pressure.

In that light, the 2.38bps rise in 10yr yields and the 6/32nds drop in Fannie 3.5 prices doesn't seem too terrible.  Also, the apex of the weakness was in the books by 10am as the glut of corporate announcements had mostly run its course.  That left the rest of the day to hold calmly sideways at the new, weaker levels, but notably without the same sort of relentless drive toward higher yields seen on previous days of the selling streak.