In the bigger picture, bonds were flat on Monday without any major volatility in either direction. But if we break out the microscope, we find longer-term Treasuries rallying modestly while MBS lost 1 tick by the 3pm close. In today's case, the MBS underperformance is most easily attributed to Treasuries' underperformance on Friday. Specifically, 10yr yields pressed up to new highs by the end of the day whereas MBS held just slightly above their mid-day lows. Said another way, if we look back 2 trading sessions instead of 1, there's no noticeable underperformance. The flat vibes are consistent with an absence of actionable info. This will change as the week continues, especially on Wednesday (Fed Minutes) and Thursday (NFP).
Modestly stronger overnight with a slight pullback at 7am. MBS up 1 tick (.03) and 10yr down 1.5bps at 4.135
12:09 PM
MBS still up 1 tick (.03) and 10yr down 2.3bps at 4.127
03:28 PM
MBS down 2 ticks (.06) and 10yr up 1.8bps at 4.132
Lock / Float Considerations
The new week is off to a flat start, which is as much of a victory as bonds could hope for in the absence of friendlier Fed comments or weaker econ data. Potential volatility remains moderate for now, but will pick up surrounding Wednesday's Fed minutes and Thursday's jobs report (even though it's a bit stale).
