Afternoon Weakness For Longer-Term Bonds. Are MBS in That Category?

It’s easy to throw around general categories when discussing the bond market such as “longer” and “shorter” term (also seen as longer and shorter ends of the yield curve). But where is the cut off?  In general, the current crop of MBS being produced to cover new mortgage originations is actually somewhere in the middle of the pack (i.e. the belly of the curve). That’s because the average newly-originated mortgage is not expected to last nearly as long as the 10yr Treasury note that often serves as a basis for comparison. Who cares?  Not us, usually.  It only matters on days where long and short term rates are doing noticeably different things. In today’s case, that provided some small benefit to MBS when compared to the 10yr.

Econ Data / Events

Existing Home Sales

3.89m vs 4m f’cast, 4.11m prev

Market Movement Recap

10:09 AM modestly stronger overnight and sideways so far.  MBS up 3 ticks (.09) and 10yr down 2.4bps at 4.228.

01:01 PM still sideways ahead of 2yr Treasury auction.  10yr down 2.4bps at 4.22.  MBS up 3 ticks (.09).

03:58 PM Near weakest levels, but in a narrow range.  MBS up 1 tick (.03) and 10yr down only 0.4bps at 4.249