MBS Live Recap: Bonds Break 7-Day Winning Streak... Convincingly

First, let's talk about how big today's sell-off was.  In terms of 10yr yields, it fully erased the past 2 days of gains and some of the improvement seen last Friday.  10s were up nearly 9bps to 1.737%.  From a technical standpoint, yields firmly rejected a break below the 1.67% level (something that looked like a decent possibility with yesterday afternoon's technical 'test').  Whereas MBS underperformed with yields moving lower yesterday, they outperformed with bonds selling-off today.  Even then, Fannie 3.0s shed nearly 3/8ths of a point and the average lender repriced 1-2 times.

Why is the bond market so cranky?  The aforementioned 7-day winning streak has something to do with it.  The longer and stronger such streaks are, the bigger and more certain a token technical rebound becomes.  There were actual motivations, however.

The first noticeable move toward higher yields followed an exceptionally strong New Home Sales report at 10am ET.  This isn't traditionally a big market mover, and indeed, it didn't result in a big move.  Less than an hour later, a Trump trade tweet did the day's most significant damage.  A weak 5yr Treasury auction confirmed traders lack of interest in stepping in front of the weaker momentum.  After that, yields drifted higher in a linear trend channel for the rest of the day.