MBS Outperform on Curve Steepening and Corporate Issuance

The yield curve has been almost exclusively in "flattening" mode since June, and aggressively so.  This means that longer term Treasuries (like 10s and 30s) have risen at a slower pace than 2yr and 5yr Treasuries.  But traders can't do the same old thing every day and today was one of those counter-trend days.  The steepening was far from extreme, but it was enough to help MBS do a bit better than 10yr notes. MBS also benefited from an active slate of corporate bond issuance (which weighed down the Treasury complex, relatively). 

Econ Data / Events

  • Fed MBS Buying 10am, 11:30am, 1pm

  • Retail Sales 1.7 vs 1.4 f'cast

  • Retail Sales Excluding autos/gas 1.4 vs 0.5 previously

  • Import prices 1.2 vs 1.0 f'cast

  • Builder Confidence 83 vs 80 f'cast, 80 prev

Market Movement Recap
08:36 AM

Flat to slightly stronger overnight.  Brief weakness after Retail Sales data, but trying to find footing now.  10yr down .5bps at 1.613.  MBS unchanged at 102-05 (102.16).

10:00 AM

Weaker after the previous update.  Modest rally at the 9:30am NYSE open, and now back to unchanged levels in MBS.  10yr down only 0.3bps at 1.615.

12:08 PM

Yields unable to break below intraday floor, now back up to 1.627.  MBS down 1 tick (-0.03). 

03:03 PM

10yr yields up 1.6bps at 1.634.  MBS have been outperforming, currently unchanged at 102-06 (102.19).