The last time bonds sold off for 6 consecutive weeks, it was 2009 and the low rate trends spurred by the financial crisis were in their infancy. This time around, the 6 weeks of pain is more of a confirmation of the market's mission to price-out the pandemic. The Fed confirmed something too: that traders were right to be wary about their SLR intentions. There will be no extension. Fortunately, it seems that the market had done enough selling to prepare for this eventuality, and bonds didn't freak out too much. That said, they didn't rally either...
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Fed MBS Buying 10am, 1130am, 1pm
Stronger overnight, then a big blast of selling after news that the Fed's SLR exemption will not be extended. Could be worse as far as current levels are concerned. 10yr just barely weaker at the moment and UMBS 2.5 down less than an eighth.
No delayed reaction to SLR news, which is a good thing. Same yield ceiling still intact and 10yr is nearly unchanged on the day. MBS underperforming a bit with 2.5 coupons down just over an eighth.
Moderate drift toward weaker levels continues, but still inconsequential in the bigger picture. 10yr yields at 1.73% are effectively snuggled up to long term highs at 1.75. and 2.5 UMBS at 102.25 are at their lowest levels in nearly a year. That's 6 weeks of pain in the books. Hopefully the next one is better.
MBS Market Alerts
