Range Breakout or New Trend Channel?

It was an interesting trading session in the bond market as Treasury yields closed at their weakest levels at the same time that MBS were at their strongest levels.  This uncommon scenario was made possible by a combination of previous MBS underperformance and anxiety over next week's Treasury auction cycle.  In the bigger picture, the moderate weakness in Treasuries serves to confirm the unfriendly range breakout.  But as we discussed this morning, we could also view this weakness in the context of a new trend channel.

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Existing Home Sales 5.88m vs 5.89m f'cast, 6.00m prev

Market Movement Recap
08:40 AM

Bonds found their footing overnight, but not in any decisive way.  EU bonds hurt while a risk-off move in stocks helped.  10yr yield down 1bp at 1.425 and UMBS 2.5 coupons are unchanged.  UMBS 2.0 are up 1 tick (.03).

10:00 AM

Modest gains have been replaced by moderate weakness.  MBS are down roughly an eighth of a point and 10yr yields are now up 1.2bps to 1.447%.  The NYSE open (930am ET) was the jumping off point for the shift in momentum.

12:22 PM

Weakness brought buyers to both sides of the bond market, but especially to MBS (Treasuries are still relatively more nervous ahead of next week's auctions).  MBS back into positive territory by roughly an eighth of a point.

03:27 PM

Treasuries at weakest levels but MBS at best levels.  This uncommon turn of events brought to you by a combination of previous MBS underperformance and anxiety over next week's Treasury auction supply.