The day before and/or after a 3-day weekend is more volatile than the average weekend-adjacent trading day. Last Friday fit that bill but today could have been mistaken for a summertime Monday (despite being a wintertime Tuesday). There were no significant reports and the available Fed comments weren't actionable. After nearly touching 4.0% in the overnight session, 10yr yields climbed slowly to 4.06 by 10am and then held mostly sideways through the close. Considering the scope of last week's rally, a "mostly sideways" day is a victory. On a cautionary note, the absence of follow-through and the overnight bounce underscore resistance potential near present levels.
Modestly stronger overnight. MBS up 1 tick (.03) and 10yr down 1.4bps at 4.036
11:20 AM
weaker in the early trading. MBS down 1 tick (.03) and 10yr up 0.7bps at 4.055
01:33 PM
Weakest levels. MBS down 2 ticks (.06) and 10yr up 1bp at 4.058
04:26 PM
heading out fairly flat. MBS down 1 tick (.03) and 10yr up 1.1bps at 4.059
Lock / Float Considerations
The new, holiday-shortened week is off to a good enough start with bonds holding most of last week's rally. That said, the absence of follow-through may speak to increased resistance as 10yr yields approach 4.0%. That's an easy cue for risk-averse clients to remain lock-biased. Meanwhile, risk-tolerant clients haven't seen enough of a pull-back to break even the most conservative overhead lock triggers.
