MBS Live Recap: Rally Extends Thanks to Silence on the Hill

Today could have gone two ways.  We could have come to find out that Friday's "delay" in the vote on the healthcare bill was an actual delay, or we could have quickly seen that the bill was dead (at least in its current form, and at least for now).  

With nary a headline or newswire covering the healthcare bill as something that still exists in the realm of near-term possibility, markets quickly decided that last week's delay was merely politicians' way of saying the bill was dead.

To whatever extent a postponement left hope alive for progress on fiscal policy, bonds had good reason to be cautious.  To whatever extent the bill was viewed as dead, bonds had good reason to press on with the rally.  And so they did.

During the overnight session, 10yr yields were as low as 2.348.  They were nearly as low to start domestic trading, but were soon pulled marginally higher by a bounce in equities markets.  Despite the mid-morning weakness, 10yr yields held onto a 4bp gain to end the day at 2.378 and Fannie 3.5s gained more than a quarter point to finish at 102-10.