Actions and reactions are as true in the bond market as in the natural world. The equal and opposite reaction to a sub 3% 30yr fixed rate is a spike in the supply of new MBS. From there, supply/demand 101 says we should see downward pressure on prices. That's exactly what happened after the Fed was done buying for the day.
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20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th)
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Philly Fed Survey 24.1 vs 20.0 f'cast, 27.5 prev
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Jobless Claims 1.3m vs 1.25m f'cast, 1.31m prev
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Retail Sales 7.5 vs 5.0 f'cast, 18.2 prev
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NAHB Builder Confidence 72 vs 60 f'cast 58 prev
Bonds were stronger overnight, generally following weakness in stocks on yesterday's covid numbers and bank earnings. The AM econ data helped extend the gains just a bit, but volatility remains muted. 10yr yields down just over 2bps and MBS up just over an eighth on the day.
Stocks have tried to stage a bounce since 5am, but haven't been able to get any decent traction. Bonds are taking some solace in that with 10yr yields now down nearly 3bps and UMBS 2.0s up 6 ticks (.19).
It looks like the Fed's 1-1:20pm UMBS buying operation left sellers hanging (they weren't as capable of selling MBS as they would have liked). That's putting some quick downward pressure on prices, but we're still nearly an eighth higher on the day.
MBS losses extended a bit and prices turned negative just after 3pm. Broader bond markets have been weakening since 11am, which isn't helping. Stocks are near domestic highs, now down less than half a % on the day.
MBS Market Alerts
