MBS Struggle to Hold Gains, But Rates Aren't Scared Yet

Bonds were mixed today with both MBS and Treasuries gaining ground (and then losing slightly less ground) at varying paces.  Treasuries outperformed, but that's not a huge surprise on a rally day.  Both have bigger fish to fry in the days ahead with plenty of potential volatility from the election, Fed announcement, and NFP.  Stakes are higher for Treasuries compared to MBS, and MUCH higher compared to mortgage rates (which have been extremely well insulated by most of the recent bond market volatility due to historically wide lender margins).  Still, if there's one market catalyst in the near term that could get things moving, it would be the election.  

Econ Data / Events
Market Movement Recap
09:13 AM

Bonds opened stronger in Asia, lost some ground on stronger data in Europe, and have been moving into stronger territory ever since.  Both stocks and bonds are doing better as traders cautiously jump back into long positions for the new month.  10yr yields down 3+ bps to .84% and 2.0 UMBS up 6 ticks (.19) at 103-10 (103.31).

12:55 PM

Bonds are off their best levels, but not panicking.  The 1.5 UMBS coupon is the only noticeable laggard.  There is no overt underlying motivation for the move apart from the fact that 1.5 coupons are simply going to march to their own beat from time to time as they continue to build liquidity.

03:00 PM

UMBS 2.0 coupons joined in the selling trend and hit lows just before 2pm.  They haven't moved much since then, but are still up 3 ticks (0.09) on the day.  10yr yields are at their highest levels since this morning, now down only 2.35bps on the day at .85%.  Very calm and narrow trading day relative to the volatility seen at the end of last week.