Uncertainty has reigned supreme for much of 2019 as traders weigh shifting economic data, potential data inconsistencies (due the shutdown), trade policy, and Brexit-driven uncertainty against central banks' collective response.  Everyone seems to be pretty confident that the Fed's response will include some new news on the topic of its balance sheet at next week's meeting.

That uncertainty combined with the prospects for the friendly Fed news took bonds to their best levels in months as of Tuesday.  From there, it looked like we were circling the wagons in preparation for next week's Fed, and that bonds were respecting a resistance boundary around 2.60%, or even 2.612% based on yesterday's domestic session lows.  

Traders set stop loss levels in line with 2.612%, but other traders had other ideas this morning.  A few big buyers managed to wrestle yields down below 2.612%.  That set off a wave of short-covering and algorithmic trading that snowballed in the 10am hour.  Shorts were covered and algos were exhausted by the time 10's tagged 2.58%.

MBS never do as well as Treasuries in these cases and today was no exception.  Fannie 3.5 coupons still had a fine day, gaining 6 ticks (0.19) to end at 100-21 (100.66), right in line with their best levels of the week/month/year.