MBS RECAP: Surprising (or Not?) Absence of Volatility


Perhaps it had to do with yesterday’s 1st round of Senate testimony or Comey’s prepared remarks giving bond markets an unfriendly bump, but bonds ended up doing very little with today’s much-anticipated Comey QA.  Then again, not much came to light that hadn’t already been known, or that wasn’t contained in his prepared remarks yesterday.  All that was left were allusions to info that might come out in the Senate’s “closed” session and various table scraps for spin doctors choosing to focus on headlines that financial markets didn’t really care about.

Then there’s the matter of counterbalancing forces in play.  Perhaps we can give some credit to the ECB Announcement for helping US bond markets push back against politically-induced selling pressure.  The day-over-day rally in German Bunds would certainly suggest that.  Then there is tonight’s UK election.  Your guess is as good as mine as to what the bond market implications will be, but we’ll know them if we see them.  Either way, traders haven’t been shy about suggesting it COULD matter.

Rates began the day in weaker territory and never made it back into the green.  10yr yields were as high as 2.215 at one point but made it back to 2.193 by the 3pm close.  Fannie 3.5 MBS managed to be within 1 tick of ‘unchanged‘ on the day at the same time.

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