Bond markets came into today in positive territory from the outset. Technical conditions helped foster bullish momentum for Treasuries overnight and into the domestic open even before a surprisingly lackluster Durable Goods report sent yields even lower. Bond markets then "faded" a better-than-expected Consumer Confidence report and hit their best levels of the day during the Fed's scheduled buying in the 2020/2021 maturities.
But yields bounced sharply after breaking 1.90 (sharply relative to the recently narrow range. It wasn't a big move in the bigger picture). This was one of two technical targets for some Treasury traders seeking to capitalize on longs taken out during last week's 2.05-2.08 yields. 10's ran back up just over 1.93, almost exactly in line with AM highs, before volume and any further volatility headed for the doors. Here's an intermediate term view of 10yr yields showing the aforementioned technical targets. Stocks are included just for kicks, and to show just how absent the stock lever has been from anything but the most narrow of time frames.
MBS weren't quite as eager to rally as Treasuries earlier in the day, but neither were they as eager to sell off when 10's broke higher, finding good support around 103-18 in Fannie 3.5's. After 10's broke back below a 2-day pivot at 1.916, the MBS bounce back kicked into higher gear with Fannie 3.5's making up for some earlier underperformance, moving from the day's lows to new highs in just over an hour.
(source: MBS Live Dashboard)
Whereas negative reprice potential was more in order in the 11 O'Clock hour, now, positive reprices are more likely, and will continue to be possible as long as Fannie 3.5's are operating at 103-22 or higher.