MBS Outperform Treasuries Thank to Light Supply at Fed Buying Operation

Treasuries didn't gain any new ground today, but it's a bit of a victory to simply hold below the recent floor at 1.075%.  Moreover, MBS outperformed after sellers offered up very light supply in the Fed's 30yr Fixed UMBS buying operation today.  By the close, UMBS 1.5 and 2.0 coupons were both up at least an eighth of a point while Treasuries weren't any better than unchanged.  All in all, it was an extremely calm trading session. Durable Goods data in the morning tomorrow followed by a Fed Announcement at 2pm ET.

Econ Data / Events

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

  • Case Shiller Home Prices (y/y) 9.1 vs 8.6 f'cast, 8.0 prev

  • FHFA Home Prices (y/y) 11.0 vs 10.3 prev

  • Consumer Confidence 89.3 vs 89.0 f'cast, 87.1 prev

Market Movement Recap
08:16 AM

Big selling needs in MBS.  Buyers holding the cards and waiting for sellers to come down to their price.  UMBS 1.5 coupons opening almost a quarter point lower.   2.0 coupons down an eighth.  Only modest weakest in Treasuries with 10yr up 1.4bps at 1.047.  GameStop futures are up 15% (everyone wants to know, right?)

12:01 PM

MBS supply/demand issues have reversed course in an obvious way--especially during and after the Fed's 11:30-11:50am ET buying operation.  1.5 coupons are up almost an eighth and 2.0 coupons are 2 ticks higher (+0.6) while Treasuries still haven't turned green on the day.

01:14 PM

Decent 5yr Treasury auction but no reaction in bonds.  10yr remains just barely weaker on the day and MBS are unchanged from the last update.

03:43 PM

Increasingly narrow range in Treasuries and modest gains in MBS.  No new developments since last check.  Very calm trading day overall.