MBS Pricing Snapshot

The balance of overnight trading is now rendered mostly inconsequential next to the early domestic session tradeflows. Plenty happened overnight, but none of it was significant, and none of it moved 10yr yields outside a super narrow 1.95-1.97 range.

That changed abruptly around 8:20am as volume returned to bond markets with a vengeance (relative to yesterday). To put that in perspective, the first hour of trade this morning looks to be on pace with those seen on 2/7 and 2/8. The problem is that the flows are all sellers, or they were until about 8:52am.

Since then, a second wave of big trades has hit screens in Treasury futures and yields moved down a quick bp from the earlier highs of 1.982. Rather than stand out as a fundamental change in direction, these look like fast money accounts having a field day in the newly renovated playground afforded by the increased volume this morning. Long story short, this is a small-sized snowball in the big picture, but feels big relative to the past two sessions.

10's are currently hanging in at 1.977, with the most recent wave of volume looking more consolidative than anything. It stands a chance to be a supportive bounce considering equities futures bounced near yesterday's wee hour highs of 1516 in S&P futures and that this morning's 1.982 high in 10's is strikingly similar to yesterday's early high at 1.981, but flows have been too volatile to say that definitively.

Against all this drama in the Treasury complex, MBS have been the "little engine that could," with Fannie 3.0's currently down only 1 tick on the day at 103-02. Not only that, but MBS held their ground with a relatively high degree of composure compared to the whipsaw in broader markets. Fingers crossed for continued ground-holding here in Treasuries, which could allow further relative improvements for MBS. The stock lever has been fairly well-connected this AM, so the 9:30am opening bell is a focal point considering the lack of econ data.