MBS OPEN: Anticlimactic Morning After

Check out current MBS prices and day over day changes HERE.

A mere change of 0-2 ticks seems almost out-of-place after yesterday's drama, but is likely a welcome respite.  So far this AM, prices have stalled out right at the potential support level suggested by yesterday's lows.  Chalk this up as "hour one" of technical edification for the 99-10 price on 4.5's.

Overnight, Bloomberg released an article that seemed more at home on April 1st than the wee hours of May 28th: Fed May Buy More Assets to Prevent Balance Sheet From Shrinking.  So the AAA credit rating called into question, inflation concerns ostensibly picking up, Fed governors expressing concern about balance sheet growing too large, and now they're apparently concerned about it balance sheet not growing fast enough?  Something doesn't add up here.  Don't get me wrong...  We agree the balance sheet needs to expand and are not concerned by inflation at the moment, but will their response really be as simple as just hitting the buy button again on tsy's?  Guess we'll find out....

Tsy's, for whatever reason are on a mild flattening rampage this AM as the long end is heavily bought compared to nearly unchanged levels in the short end.  Economic data hits the wires shortly which probably will have an insignificant impact compared to today's 7 year auction, potential headlines, and continued sorting-out and "sense making" of yesterday's chaos.  Stay tuned.  It's "special continuing coverage day!"