Remember the Polish Foreign Minister’s warning about Russian troops amassing at the Ukrainian border? No? Can’t blame you there, but what about the NATO general with a similar statement the next day? ‘Who cares’ you say? Another understandable response, but to be fair, markets cared at the time. In fact the growing threat of a Russia/Ukraine war has been one of leading concerns fueling a bond market rally.
So it’s no surprise that bonds scurried back to weaker levels after the Russian Defense Ministry said the country ended “drills” on the Ukrainian border and would be returning to permanent stations. Fortunately for MBS, Treasuries took the brunt of the punishment, but unfortunately, not enough to avoid negative reprices for a slight majority of lenders.
Still, there had been a cushion of gains in place from the overnight headlines that the US could (and shortly thereafter “did”) begin airstrikes in Iraq. The net effect is a Treasury market that ended the day relatively unchanged, and MBS prices that were about an eighth of a point weaker. Keep in mind, however, that 4 tick weakness is PRE-ROLL. It’ll be about 14 ticks after the roll.