Treasury Consolidation Runs Out of Room, But MBS Keep Gaining

 MBS continue to outperform due to favorable supply vs demand.  Treasuries continue sideways.  In fact, they found a way to express even more uncertainty than the prevailing sideways range of .63-.73 in 10yr yields.  Today's trading range?  .64-.66.  This caps a consolidation trend that will have a hard time getting any narrower.  Perhaps bonds are circling the wagons ahead of tonight's presidential debate and prepared for a relatively bigger move tomorrow?

Econ Data / Events

  • 20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th)

  • Case Shiller Home Prices (July) +0.6% vs 0.3 f'cast, 0.0 prev

  • Case Shiller Home Prices (annual) 3.9% vs 3.8 f'cast

  • Consumer Confidence 101.8 vs 89.5 f'cast 86.3 prev

Market Movement Recap
08:53 AM

Modest overnight weakness in stocks and strength in bonds.  Treasuries and MBS lost just a bit of ground at the open and are now perfectly unchanged on the day.  UMBS 2.0 coupons are at 103-11 (103.34) and 10yr yields are at .6577%.  

12:34 PM

MBS made small but noticeable gains during and immediately after the 11:30-11:50am Fed buying operation.  Sellers brough light supply once again.  2.0 coupons are up an eighth on the day.  10yr yields are also near their lows, down 1.14 bps at .646.  Stock market weakness is well-correlated with bond gains so far.

03:45 PM

MBS pushing the best levels of the day  (103.5) despite Treasuries weakening just slightly this afternoon.  Keep crediting the favorable supply/demand environment for MBS outperformance and the stock market for ending the day's Treasury rally.  That said, 10yr yields are still more than half a bp lower.