A fresh (or perhaps "slightly less stale") take on stimulus prospects pushed bond yields higher overnight. Domestic hours were calm until MBS lost their composure in the afternoon. It wasn't a catastrophe, by any means, but it highlighted the issues that can sometimes be caused by illiquidity (issues not seen elsewhere in the bond market today).
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20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th)
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Wholesale Inventories 1.1 vs 0.9 f'cast, 0.9 prev
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10yr Auction: .951 vs .947 f'cast, 2.33x btc vs 2.41x avg (what's this?)
Moderately weaker overnight after new stimulus pitch (Mnuchin adding some $$ to sweeten the deal for democrats... seen as more of a passable bill than previous options). No major movement after that weaker overnight drift. 10yr up about 2bps and UMBS 1.5 down 2 ticks (0.06). Stocks are just a hair higher.
Bonds had been very flat for the entire session up until the past 20-30 minutes. Vaccine headlines and post-auction trading are the only two suspects in the area (discussed more here). Treasuries responded better than MBS with 10yr yields near the day's lows at .933. MBS' hands are tied to a greater extent ahead of 30yr UMBS settlement process that starts today.
Treasuries have weakened slightly after the most recent rally. While that's not helping, MBS are having their own problems for their own reasons--chief among them being late day illiquidity issues (buyers and sellers moving farther apart on price). Settlement is looming. Sellers are hard up to move inventory heading into settlement day and buyers are using that to their advantage (by pushing prices lower).
MBS Market Alerts
