Final trial results for Moderna's vaccine (it's still really good, by the way) failed to produce a huge reaction in markets overnight, but it did coincide with higher Treasury yields to start the day. As bonds recovered, MBS outperformed--at first, by a little. Then, by a lot. Month-end trading motivations were the only game in town when it came to assigning blame for all of the micro movement. The Fed's MBS buying operation from 1pm-120pm was clearly the motivation for the final surge in MBS in the afternoon.
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20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th)
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Chicago PMI 58.2 vs 59.0 f'cast, 61.1 prev
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Pending Home Sales -1.1 vs +1.0 f'cast, -2.0 prev
Stocks and bond yields moved lower during Asian hours but bounced in Europe. Moderna's final trial results added to stock optimism and bond weakness, but only modestly. Bonds are still fairly close to Friday's latest levels with 10yr yields up 1bp at .852 and 1.5 UMBS nearly unchanged at 101.
Bonds have been rallying modestly all morning with 10yr yields just turning positive on the day. MBS have been outperforming and 1.5 coupons are now up an eighth of a point. Chalk this up to a supportive reaction from buyers after "fast money" traders sold bonds early this morning on Moderna's final vaccine trial news. There was also a modicum of month-end buying for traders that didn't get their fill last week.
Strong gains for MBS (on top of Friday's strong gains), despite Treasuries being flat to slightly weaker. Trading was uneventful in the bigger picture, driven mainly by month-end positioning. MBS drew strength from Fed buying operations with the most noticeable pop following the final installment at 1-120pm ET.
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