Back on Thursday afternoon, bonds/rates looked like they were just wrapping up the process of rising into position between the old range and the new range (2.52-2.55%). With NFP being the big market mover that it is, the expectation was that rates would be making a choice between one of those two ranges on Friday. As it happened, however, bonds briefly touched the highest yields in 2+ weeks and then decided to head the other direction.
But they didn’t head the other direction in a convincing way. In fact, for all practical purposes, rates continued to fly a holding pattern at the edge of both ranges. That phenomenon continued today with yields edging back up to 2.52% after briefly making it below 2.50% in the overnight session.
For their part, MBS weren’t too troubled by the Treasury weakness, but the less liquid afternoon hours allowed seller to take control. By the end of the day, Fannie 3.0 coupons were down more than an eighth of a point, resulting in a few negative reprices.