Strong Move in Treasuries But MBS Underperform (Significantly)

While much of the world of finance and institutional investment seemed to be preoccupied with day trading some truly epic ridiculousness via Game Stop, the bond market was doing a few interesting things of its own.  Treasuries jumped out to an early lead with help from Europe, but several big trades helped yields move even lower after the 10yr broke an important floor at 1.075%.  MBS had a completely different day with a significant amount of underperformance during and after the Fed's final buying operation of the day.  At 4pm, UMBS 1.5 coupons were roughly unchanged on the day while 10yr Treasuries were nearly 5bps lower in yield!

Econ Data / Events
Market Movement Recap
08:23 AM

Moderately light volume overnight.  Bonds were flat during Asian hours, but rallied with European bonds following slightly weaker econ data and persistent covid-related concerns (i.e. new strains on the rise while vaccine distribution is sluggish).  10yr yields down more than 2bps and MBS starting out up an eighth of a point.

11:08 AM

Bonds going on a bit of a run now (in a good way), with several large block trades hitting CME screens at 10:21am ET.  Subsequently, heavy losses in stocks have driven additional 'flight-to-safety' trading.  10yr now down almost 5bps at 1.04% and MBS 1.5 coupons are up almost a quarter of a point.

03:19 PM

MBS-specific underperformance following the latest FedTrade buying operation (MBS sellers didn't move as much inventory as they would have liked and thus "put it on sale" after the Fed was out of the picture.  Both 1.5 and 2.0 coupons are down more than an eighth from intraday highs.  No real drama in Treasuries with 10s down 4.5bps at 1.04%.