MBS Live Recap: Surprisingly Informative Despite Boring Facade

On the surface, today was a boring day for bond markets.  10yr yields ended less than a bp lower than yesterday's close and Fannie 3.0 MBS were completely unchanged.  But as far as gleaning information, it wasn't a total loss.  

Late in the overnight hours, bonds sold-off somewhat abruptly as a big seller decided it was time to sell.  Weakness lasted from roughly 6:33am to 6:58am ET and took 10yr yields from 1.76 to 1.788.  At the time, all we knew is that sellers got cold feet as yields approached 1.80, but we didn't know if domestic market participants would agree with 1.788 as an upper boundary for the day.

They agreed!  Bonds scarcely moved until the CME open at 8:20am, but began to improve in fits and starts.  The 10am Consumer Confidence data helped solidify today's high yields as "buying opportunities" and paved the way for additional gains through 11am.  By no means did we witness the sort of strength needed to challenge the lower end of the recent rate range, but at least we saw some willingness to buy bonds at the right price (not to mention a good idea of  the "right price" itself).  Bottom line: the upper end of the yield range was reinforced.