There were no overly interesting headlines or economic reports in today’s session to guide market movements. Instead of taking cues from data and events, traders were left to watch other traders and adjust positions accordingly ahead of tomorrow’s FOMC Minutes. That’s basically a complicated way to say ‘markets did what they wanted and needed to do for reasons we don’t have the luxury of knowing.’
One of the only overt moves of the day came late in the session where Spiky movement in Japanese Yen correlated with Treasuries reaching their best levels of the session (2:22pm).
MBS prices topped out at the same time with Fannie 4.0s hitting 104-21–a 7 tick gain. Keep in mind that shortly after the close today, prices will fall into what looks like negative territory due to the “roll” (the day each month, just before MBS Coupons are settled that trading stops on the current month’s coupon). This means the indication for “MBS Prices” will no longer come from April coupons and instead will be based on May coupons. The trailing month coupon always trades at a lower price. The appearance of a drop in price is merely a change from viewing the current month to the next month–not an actual dose of weakness. Market participants are already well aware of the prices associated with the next batch of MBS and there is no effect on rate sheet pricing.