MBS Pricing Snapshot

The week has gotten off to an as-expected slow start. Volumes were light in the overnight session and inspiring data/events have been limited. Treasuries mostly followed European Benchmarks lower in yield, bottoming out in the mid 1.51's at 5am and gradually rising since then, now back up to 1.529.

Despite the bounce higher, Treasuries remain in better territory than all of Friday's range--an accomplishment that MBS have yet to duplicate this morning. Fannie 3.0s and 3.5s both remain noticeably inside Friday's range with the former up 3 ticks to 103-12 and the latter up just 2 ticks at 105-25. That said, until Friday, both of those price levels would have been all-time highs.

There is no meaningful economic data scheduled this morning and one of the only potential sources for guidance is already underway as ECB Pres Draghi is mid-testimony to European Parliament. So far, he hasn't divulged anything materially different from the statement that accompanied last week's ECB rate cut, but the speech is ongoing.

With a slightly greater potential so stir the pot (but still by no means a guarantee) Euro zone finance ministers are meeting again today to continue hammering out decisions and discussions from the recent EU Summit (more on that in "The Week Ahead" linked below.

Thus far, it looks like bond markets are inclined to treat the 5am lows (with additional bounces just after 6am and 8am) as a technical resistance level so far this morning. Low volume and lack of guidance could make for additional volatility to start the week. If 10's continue to rise, the logical choice for an overhead pivot seems like it should be Friday's low yields in the high 1.53's. For MBS, due to the underperformance, that would be more like 103-10 in Fannie 3.0s. In other words, that would be a decent line in the sand to watch by way of indicating a shift into weaker territory.