MBS Live Recap: Waiting Game Begins Again

After slogging up toward (but not over) long-term highs 2 weeks ago, 10yr yields began a waiting game that looked like it would take a cue from last Wednesday's FOMC events.  As bonds rallied coming away from the Fed, there was at least some chance that we'd turned a corner and could start thinking about a more sustained rally.  

Friday afternoon's weakness raised some doubts as to that potential rally, and today's weakness confirmed those doubts.  Bonds are right back in the same  range, holding uncomfortably near the highest levels in 7 years set back in May 2018. 

There were no specific, overt sources of inspiration for today's selling pressure.  Granted, we could point to Canada joining NAFTA 2.0 or another strong reading in ISM Manufacturing (weaker than expected, but still the 4th highest reading in 14 years), but we didn't see any of the telltale signs of a bond market trading based on individual events (concentrated volume and movement immediately following the event).  

That's not really ideal because it means sellers are selling for reasons that go beyond the day-to-day  developments.  This raises questions as to this week's economic data being able to come to our rescue (in the event the data is more moderate compared to previous readings).  

There is no significant data on tap for tomorrow, but Fed Chair Powell is scheduled to speak at noon.  In the meantime, we're keeping a close eye on recent highs near 3.10% and then on long-term highs at 3.126% (10yr yield).  

For their part, MBS fared better than Treasuries today, with Fannie 4.0 coupons only losing 1/32nd (0.03) compared to Treasuries' 0.02% sell-off.  Volume was light overall, which may indicate we have yet to get an accurate sense of October's prevailing momentum.