The juxtaposition of an uncharacteristically early close on Friday, an important nonfarm payrolls release, and widespread holiday closures in European markets mean things may not be entirely as they seem for the bond market over the past 2 trading sessions.  More simply put, the market might be doing something a bit different if it didn't have to navigate the holiday-related weirdness.  Things will rapidly be getting back to normal in terms of participation starting tomorrow.  Then on Wednesday, we'll get CPI in the morning and Fed minutes in the afternoon.  A big beat in the CPI data would almost certainly be enough to confirm a friendly range breakout whereas a big miss would strongly reinforce the range.

To be fair, we technically already saw a range breakout last week, but it was short-lived (it needed confirmation from NFP, and NFP did not deliver).

MBS have been faring a bit worse, relative to Treasuries.  There are several ways to quantify "underperformance," but here's a quick way to get a rough idea with easily accessible data (i.e. no high level bond math required).  The following charts simple compare MBS and Treasuries against their own ranges over 5 days and 3 months.  In the first chart, MBS are trading at or below their lows from a week ago this morning while 10yr yields aren't yet back to last week's high yields.

Over a 3 month time frame, we find MBS not quite back to early Feb highs while Treasury yields just set new lows late last week:

MBS have been underperforming in general since early 2022, but plateaued in October.  After making some progress by early February, they've been underperforming again since then.  Culprits include general volatility, additional supply from bank asset liquidations, and faster prepayment expectations any time rates head into the 7s.  In addition, there's the constant issue of the Fed's absence in a market where they accounted for a much larger portion of the overall buying demand compared to Treasuries.

Speaking of the Fed, Wednesday's minutes may help the market refine its expectations for the next meeting in May.  As recently as last Thursday, traders so a zero percent chance of another rate hike.  But after NFP, Fed Funds Futures have closed more than half of the gap to a 0.25% hike.