MBS Live Recap: Slow Day For Bond Markets; MBS Outperform

It was an exceptionally slow day for bond markets with the exception of some tension, at times, during the morning hours.  Treasuries and MBS both began the day in weaker territory with currency fluctuations being the key motivation early in the overnight session.  Weakness in European bond markets set the tone during the 2nd half of the overnight session.  None of the above amounted to a "big deal" in any interesting way.

Bonds weakened a bit more, following stronger than expected Import Price data (+0.4 vs +0.2 forecast), but soon found their footing.  10yr yields bounced at 2.434% at the NYSE open and went no higher for the rest of the day.

Weaker than expected Consumer Sentiment helped the recovery at first, but gains were interrupted by the announcement that the Fed's Tarullo will retire earlier than expected.  Bonds weakened in response because this moves up the timeline for the Fed board majority being appointed by Trump, and traders generally feel the Fed will be more hawkish based on the names being thrown around.

Bonds were able to get over that speedbump fairly quickly and coast sideways for the rest of the day.  MBS did slightly better than Treasuries.  In fact, Fannie 3.5s ended the day 1/32nd in the green.  10yr yields were 1.25bps higher.