MBS Pricing Snapshot

The key market mover so far this week has been Germany's IFO Business Climate Index, which fell to 101.4 vs expectations of 102.5. Germany's 10yr notes (Bunds) moved sharply lower in yield from 1.59 to 1.557. Even though US 10yr notes experienced a much smaller amount of benefit, the gains seen in the wake of the sentiment reading have held firmer for Treasuries.

10yr yields essentially drifted sideways in a narrow range after the data and began the morning another 3bps improved from last week's latest levels at 1.723 and are in similar territory as we approach the end of the first hour.

Adding to the linear market response theme overnight (i.e. discouraging headlines hurting stocks and helping bonds), stock futures are down nearly 15 points in the S&P from Friday's strong levels at the 1pm cash close. A moderate dose of European headlines helped facilitate this process including grumblings about the on-again-off-again Spain bailout, Greece's "too big to not fail" budget deficit, and a German official's denial of earlier reports of increased ESM leverage taking the fund to €2 Trillion.

MBS are merely going about their business against the backdrop of all of the above. Fannie 3.0s opened the session a tick off all-time highs of 105-07 but just to leave no doubt, have ticked into official all-time highs on a few occasions this morning (105-09) and currently sit 5 ticks higher vs Friday's close at 105-08.

As expected, the inconsequential tidbits of morning data have been, well...inconsequential. The next quasi-noteworthy event is probably the 10:15-11:00 scheduled Fed "Twist" buying though any major directional moves at the cash open for stocks could garner nominal attention from bond markets. Volume is low enough so far this morning that one side of the market wouldn't have to shout too loudly to be heard elsewhere.