MBS Pricing Snapshot

10yr Treasuries and MBS are telling two different stories at the moment. While 10's look to have broken lower in yield past their earlier sideways resistance, MBS are still mostly holding their range.

Cash volume remains light, but there was a bit of a pick-up in futures volume (and prices) for 10yr's. Another little incremental pop in price from one bigger buy ticket can trigger a few more shorts to cover, creating another little pop higher, and the cycle repeats itself until black boxes or human beings step in.

What we're left with is a mini-snowball from 1.98 to 1.97 with the first pause for reflection there. If others are as "done" with the week as we are, it wouldn't surprise us if black-box trading tied to equities has been left with a little bit more control than it otherwise might have. In other words, we're not witnessing any organic, material bullishness in bond markets at the moment, but an incidental vulnerability being exploited in our favor.

Wash rinse and repeat within the range. If 10's run past 1.95, then it'd be more of "situation." But for now, the end-of-week papers are being shuffled and filed, resulting in the appearance of activity rising from 0 to 0.5 on a scale of 10. MBS got into the green? Great! But we're not reading too much into it not only because MBS are less willing to chase this uptick, but also because it's what we'd call "incidental" movement--not indicative of a shift in underlying trading sentiment. That said, if we pick up another tick or two, another lender or two besides PF might feel generous enough to cough up another few bps. So if you were planning on locking today, we'd wait until closer to cut-off, just in case.