MBS RECAP: Back To More Central Levels Ahead Of NFP

103-10 continues to be the dominant technical level for Fannie 3.0 MBS after the morning’s sell-off. Earlier in the day, it offered support but has since become the mid-point of a surprisingly narrow range between 103-08 and 103-12. 10yr yields have similarly cut a narrow range since late morning from 1.66 to 1.68. Volumes have died down ahead of tomorrow morning’s NFP data.

It’s interesting to consider that narrow ranges mentioned above are behaving very similarly to ranges over the last 3 months. Consider 10yr yields for instance. The central tendency has been squarly on 1.55-1.68. Just like there have been breakouts on either side of TODAY’s central pivot points, so too have there been breakouts from the longer term central range. The fact that we’re back in that range and that yields are seeming to pay attention to pivot points (i.e. big bounce at 1.55 a few days ago and now holding ground near 1.68 today) seems to suggest bond market’s preference for neutral territory ahead of market-moving events.

Granted, this is the weakest side of neutral territory and that’s no fun for day to day changes in MBS/Rates, but the saving grace is that current levels make sense in the technical framework and “feel” worse than they are after bond markets came off the more aggressive end of the range on Monday.

Article source: http://www.mortgagenewsdaily.com/mortgage_rates/blog/273704.aspx

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