Treasuries did little to react to a smattering of potentially market moving headlines today (surprisingly little, in fact, considering Treasury is unexpectedly clawing back hundreds of billions of dollars of the Federal Reserve's lending power and suggesting those funds be redirected to targeted stimulus). Rather than force a discussion of questionably relevant market movers, we can instead focus on something of actual interest to the mortgage bond market: the rapid increase in prevalence of 1.5 UMBS 30yr fixed coupons! Today's AM commentary and video go into much more detail on the topic.
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20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th)
Treasuries started the overnight session in stronger territory as Secretary Mnuchin's request for the Fed to return $455 bln earmarked for pandemic response created an uncertainty bid (and lowered the implied supply pressure on US government debt). This move was unexpected as far as markets and the Fed are concerned. Mnuchin clarified his stance in a CNBC interview this morning and bonds bounced back into weaker territory. 10yr yields are up half a bp at .847 and MBS are down 1-2 ticks, bringing them right in line with yesterday's best levels (not counting the pop right at the close).
Treasuries have been fairly stable after modest losses in the 9am hour. Yields are still slightly lower on the day at .836 (10yr). MBS are underperforming with 1.5 and 2.0 UMBS coupons both slightly weaker vs yesterday's latest levels (2 ticks or -0.06). Stocks are still slightly weaker on the day as well. Trading is ho-hum ahead of the holiday week with little (if any) clear connections between news/data and market reactions.
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