MBS RECAP: Have You Heard The One About "The Range?"

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We might have expected a bigger movement in the wake of the colossal improvement in New Home Sales (654k vs 582k previously, 580k forecast), but bonds barely budged.  In fact, the first move following the data was into STRONGER territory for bonds.  

Treasuries eventually gave up some ground heading into the afternoon, but MBS didn’t follow.  The differences in relative performance are far from troubling.  They were simply more noticeable because Treasuries were in weaker territory day-over-day while MBS were stronger.  In other words, Treasuries were red and MBS were green, but both were close enough to ‘unchanged.’

The 2yr Treasury auction went off without a hitch, but it’s tomorrow’s 5yr auction that is more capable of causing movement for the MBS coupons we follow (Fannie 3.0, at the moment).  Even then, Treasury auctions are not major market movers in general these days.  For that, markets continue to wait for Yellen on Friday–the only event this week with significant potential.  Still, “potential” is the operative word there.

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