MBS RECAP: 12/22/2011


Last week, all the highest hours of volume in 10yr futures contracts were near the 130-140k range. The best we’ve managed so far today is the current hour at just over 80k, and that stands a good chance of being the largest of the day.

Stock markets and the Euro aren’t doing anything too crazy, yet 10yr yields have fallen from nearly 1.98 yesterday to 1.92. Why the divergence? Probably a combination of post-auction-cycle relief and the current Fed POMO buying in 10’s. That buying ends now and selling could pick up if the Fed didn’t pick up some inventory that was otherwise hoping to be sold before year end. So don’t fret over a little pop higher in 10yr yields here if we get them. Very little of consequence is occurring today.

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