Saturday , 16 January 2021

MBS MID-DAY: Corrective Bounce Leaves Bonds Slightly Weaker

By Matthew Graham

Posted To: MBS Commentary

With the 10yr auction coming up in about an hour, yields find themselves slightly higher than yesterday’s latest levels. Their first move overnight was to a new 19-month low of 1.864 . That served as a cue for many bond traders to book profits on previous bets that rates would move lower. In fact, bond markets made it to 8am in noticeably stronger territory. MBS opened nearly a quarter of a point higher (factoring out the effect of the roll) as a result. Additionally, MBS are holding their ground more effectively than Treasuries. Part of the reason is MBS-specific as the Fed is buying Fannie and Freddie 30yr coupons today. There’s also some Treasury-specific weakness as markets tend to build in some “concession” ahead of the auction. There haven’t been any significant…(read more)

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