MBS Live Recap: After More Nuclear Headlines, Bonds Punt

Who knows how today's trading would have unfolded absent the overnight headlines that North Korea was planning to test an ICBM with a Hydrogen warhead in the Pacific Ocean.  This prompted a risk-off move early in the overnight session (stocks and bond yields lower).  After that, bonds seemed reluctant to challenge either side of the most recent range (2.24-2.28%).

That was basically it for the rest of the day.  Yields drifted down to 2.24% just after the NYSE open, but quickly and decisively bounced.  About an hour later a few big trades came across in the Treasury Futures complex, pushing yields abruptly higher, but not significantly higher.

MBS held even steadier than Treasuries with Fannie 3.5 coupons staying inside an ultra-narrow range of 3/32nds.  We'd expect to see today's range boundaries challenged next week, and for the breakout to hearken some additional momentum in that direction.  All things being equal, a weekend without a nuclear detonation would likely be a net-negative for bond markets.  What a world.