MBS Pricing Snapshot

After holding in a clearly defined range for 2 weeks, the current week was expected to play host to a break of that range. In grand, symbolic fashion, the very first levels encountered this week are firmly outside the range.

Thankfully, "outside the range" means "in better territory" this morning. Overnight events and data out of Europe--and to a lesser extent, Asia--kicked things off. Bond price positivity was courtesy of European negativity as manufacturing data was weaker and election uncertainty lingers for France and Holland.

10yr yields have been in the 1.92's most of the morning and Fannie 3.5 MBS currently trade at 103-24. There are no major scheduled economic events for the day, so bond markets have less guidance than they otherwise might. On occasion, that leads to yields being more noticeably connected to stock prices.

This time around, and although we are already seeing the previous range broken and expecting a range-break in general, bond markets' desire to extend the current rally could be generally lessened by the impending FOMC information on Wednesday. In other words, a little testing of recently untested frontiers makes good sense, but aggressive, directional momentum into stronger territory would be harder to reconcile until markets have Wednesday's FOMC-related events in the rearview.