Friendly Bounce May Already Have Run Its Course

Friendly bounces after strong selling sprees are slightly more likely to play out over 2-day time frames.  That was the risk heading into today after Tuesday and Wednesday saw Treasury yields close lower for first back-to-back days since mid-January.  And as far as Treasuries are concerned, the 2-day rule is in effect.  Either that, or we seeing extremely cautious trading ahead of the 3-day weekend.  Thankfully MBS outperformed, but most mortgage lenders priced defensively nonetheless. 

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Jobless Claims 793k vs 757k f'cast 812k prev

Market Movement Recap
08:42 AM

Very light trading overnight with Asian markets closed for lunar new year.  Slightly weaker by the start of European hours and flat since then.  No major market movers in play.  10yr yields up 1.6bps at 1.14%.  2.0 UMBS down 1 tick (0.03) at 102-29 (102.91).  No reaction to Jobless Claims data (slightly weaker)

12:00 PM

Steady weakness from the start of the domestic session.  MBS swooped down by an eighth of a point briefly, but have since bounced following the Fed's 11:30-11:50am buying operation.

01:04 PM

Pressure persists after relatively weak 30yr bond auction.  It wasn't catastrophic, but bad enough to push 10yr yields back toward the highs of the day (up 3+ bps at 1.157%).  2.0 UMBS are down only 1 tick (0.03) on the day at 102-29 (102.91), but the auction JUST happened and the reaction is still playing out.

03:00 PM

MBS now UP 1 tick (+0.03) while Treasuries continue to languish.  10yr still up more than 3bps at 1.158. There's a very linear, calm uptrend in yields throughout the day, including the overnight session.  Looks like traders know where they want to go heading into the holiday weekend.