Do you like it when MBS outperform? How about when they underperform?
Are you a fan of bond market gains? Or do you prefer losses?
Would you like to see rates making a case for a ceiling bounce? Or is it more meaningful if they're bouncing on a floor?
If you answered yes to any of the questions above, you're in luck! ALL OF THAT happened today!
After surviving the overnight session in unchanged territory, bond began to weaken as domestic traders got active for the day. At that time, MBS were clearly outperforming, which is no surprise given the modest weakness in Treasuries. But bond selling was met with a solid show of support at an intermediate technical ceiling of 1.90%. The ground-holding in Treasuries fueled ongoing outperformance in MBS (mortgages like weaker Treasuries, but not TOO weak).
Things began to shift heading into the afternoon and especially after the strong 30yr bond auction. The highest bidding demand in 2 years helped yields recover and move back into positive territory. For a variety of reasons (discussed in the attached video from the MBS Live Huddle) it was Treasuries' turn to outperform. By the afternoon, both MBS and Treasuries had improved by comparable amounts, but notably, 10yr yields were unable to break below the technical floor at 1.85%.
Tomorrow is NFP day, and although the jobs data isn't currently fulfilling its destiny as the most important market mover month in and month out, it can still shake things up if it falls far enough from forecasts in either direction.