The rate reset continues.  Just when you thought 10yr yields surely couldn't go any higher, they did.  New intraday highs of 1.394% in 10yr yields, and closing near the 1.37% inflection point.  MBS aren't happy about it.  When rates spike this quickly, MBS typically have to undergo a fast and painful repositioning of relevant coupons.  The current iteration has seen 2.5 UMBS take the place of 1.5 coupons in just a few short weeks.  But even 2.5 coupons got killed today.  Multiple lenders repriced for the worse--some of them more than once.

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Leading Economic Indicators 0.5 vs 0.5 f'cast

Market Movement Recap

08:40 AM

Heavy selling overnight in Asia.  10's hit highs of 1.394.  Better buying in Europe despite stronger data.  Early domestic traders also looking more willing to buy.  Yields only 1bp higher now, give or take, trading around 1.35%.  UMBS 2.0 coupons down an eighth after being down more than twice as much to start.

12:33 PM

Ample volatility during domestic session with MBS taking the worst of it (relative to Treasuries).  MBS now at lows of the day as Treasuries inch back toward highs.  2.0 UMBS are ceding relevance to 2.5 coupons.  both are down 10 ticks (.31) on the day.  10yr yields are up 1.73bps at 1.357%.

01:54 PM

Just when you think "surely we've seen enough selling that bonds HAVE TO bounce soon," here comes more selling!   MBS prices are pushing down to lower lows and 10yr yields are up another bp from last check at 1.365%.  Feb is now the worst month for bonds since Nov 2016 (presidential election reaction).

04:30 PM

MBS managing to keep losses inside of half a point on the day with 2.5 coupons "only" down 3/8ths.  10yr yields are up scant 3bps to 1.37%--not nearly as bad as the MBS sell-off (in terms of yield, MBS would be up roughly 7bps today by comparison).