If you didn't catch the mid-day commentary, it has a good recap of most of the day's activity.  If you're not into links, here are the important parts, distilled into TGIF-style brevity:

  • MBS underperformed Treasuries in a big way due to market volatility (which almost always sees Treasuries making the bigger move, regardless of direction) and because of the next bullet point.
  • Treasury yields--unbeknownst to us without the benefit of hindsight--were set up to fall like dominoes today due to a preponderance of short positions (traders betting on rates going higher). 
  • Many market sectors saw investors move to cash or close out positions in order to be nimble ahead of the Fed.  A short position in Treasuries is closed (or 'covered') by buying bonds.
  • The short-covering rally in Treasuries was further fueled by weakness in stocks and oil.
  • After the 3pm CME pit close, investors seeking to hedge their bets with certain options trades were forced to cut bait and dump remaining cash into Treasuries.  That provided one last little explosion of bond market improvement that ultimately starved the fire and set the low yields of the day.
  • MBS could only watch in amazement.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
FNMA 3.0
100-15 : +0-17
FNMA 3.5
103-17 : +0-13
FNMA 4.0
105-31 : +0-06
Treasuries
2 YR
0.8790 : -0.0680
10 YR
2.1320 : -0.1020
30 YR
2.8760 : -0.0950
Pricing as of 12/11/15 6:45PMEST
Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
3:53PM  :  Energizer Bunny Rally Finally Out of Juice?
10:10AM  :  Biggest Rally of The Week Despite Decent Data. What's Up With That?
MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "RTRS- CFTC-SPECULATORS SWITCH CBOT US 10-YEAR TREASURY FUTURES TO NET SHORT POSITION OF 24,549 CONTRACTS IN WEEK ON DECEMBER 08 VS 15,519 NET LONGS A WEEK AGO"
Matthew Graham  :  "And here we go with some proof/evidence supporting the earlier assessment about the move to the sidelines connoting bond BUYING due to an uptick in short positions:"
John Tassios  :  "FED tightening cycle triggers widening spreads in that typically begins in lower grade bonds. That should have been expected with looming rate hike. The bigger issue is what MG pointed out earlier this morning, illiquidity is triggering more selling positions in lower grade bonds. Thus safe trades into TSY's & MBS."
Christopher Stevens  :  "2.13 was the top of the retracement range that we saw back in mid October."
Sung Kim  :  "high yield market subject of several headlines today - if you had been a member of MBS live 1 year ago, i do believe this topic has been addressed"
Christopher Stevens  :  "Bottom line, this has nothing to do with today's data or with any leak of next week's Fed Announcement. It has quite a bit to do with the significant weakness in stocks and oil, and just as much--if not more--to do with the snowball dynamic and flight to the sidelines ahead of next week's Fed.""
Victor Burek  :  "oil"
Brent Borcherding  :  "What's this all about?"
Sung Kim  :  "they are coming so fast that you cant even keep the comments in line"
Victor Burek  :  "sure is nice to see the flood of reprices better"