MBS Live Recap: They Can't Even Let us Enjoy Green Days Anymore!

What a frustrating day!  Yes, it's true that bonds ended up in positive territory at the close, but it would have almost been better to endure a modestly weaker day without the volatility.  As it stands, we were built up largely to be let down.

Stocks began selling fairly aggressively overnight.  10yr Treasury yields were 5bps lower before domestic trading ever began and continued into even stronger territory by 10am (3.11% at the best levels).  All of that coincided with additional weakness in equities.

Up until that point, MBS were stronger as well, but not nearly as noticeably as Treasuries.  To make matters worse, the average lender didn't pass along much of the improvement on rate sheets.  That's not uncommon and we would have been well within our rights to expect additional improvements pending the sustainability of the gains.

The gains were not sustained.  Shortly after 10am, stocks bounced and bonds followed.  The reversal was tolerable at first, but the pace increased after markets crossed into the 2pm-3pm hour, which tends to see heavy participation from leveraged day-traders and algorithm-based accounts.  Yields spiked at the quickest pace of the day leaving gains that could only be considered "moderate" in Treasuries and "modest" in MBS.