After failing back to back attempts to retake the recent sub-.72 range, 10yr yields didn't even try today. Part of the problem was a stronger Retail Sales report this morning, which had a surprisingly clear impact on the market--at least for an hour. Bonds returned to the doorstep of the previous range, bounced momentarily at 0.7207% and promptly spent the rest of the day sideways at .74+. Fortunately, MBS defied the odds and outperformed, but not for the right reasons. Bonds are still waiting to see where the chips fall between the election, stimulus, and of course the path of the pandemic both at home and abroad.
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20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th)
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Retail Sales 1.9 vs 0.7 f'cast, 0.6 prev
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Core Retail Sales 1.4 vs 0.2 f'cast, -0.1 prev
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Consumer Sentiment 81.2 vs 80.5 f'cast, 80.4 prev
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Industrial Production -0.6 vs +0.5 f'cast, +0.4 prev
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Business Inventories 0.3 vs 0.4 f'cast, 0.1 prev
Moderately stronger overnight before having gains erased by stronger Retail Sales data. 10yr yields lost a quick 3bps (move is still playing out) and are at .75+ at the moment. This risks acting as a technical rejection of the 0.72+ pivot point. MBS lost the 2 ticks (0.06) they'd gained at the open and are currently unchanged.
The bond market is quickly becoming a ghost town heading into the weekend--especially MBS. Fortunately, the few accounts left trading for the day are imbalanced in favor of buyers. That has MBS up almost an eighth on the day even though Treasuries are still in negative territory.
Illiquidity fueled a surprising amount of MBS outperformance today. The more we see it, the less we expect it to continue. Treasuries were mentally checked out by 11am, drifting sideways at slightly weaker levels--effectively punting into next week.
MBS Market Alerts
