MBS RECAP: Volatility Inside a Range; Still Waiting For "Something"


There are several “somethings” that could prove inspirational for bond markets at the moment.  The biggest among those continues to be any major shift in the stock market.  Specifically, if stocks move to threaten recent lows or challenge Oct/Nov highs, bonds would almost certainly be forced to follow. 

If stocks remain indecisive, bonds could take cues from other sources.  The most immediate candidate is “European markets” given that the ECB announcement is coming up tomorrow morning.  Beyond that, any major updates on the shutdown situation or China/US trade talks have already proven themselves capable of pushing bonds around.  

Europe helped US bond markets gain ground heading into the afternoon today (EU market close).  Stocks were even getting in on the action, but everything reversed course after European markets closed.  Stocks and bonds retraced about half of the move lower from the 9am highs.  This left 10yr yields up 1.1bps at the 3pm close at 2.752.  Fannie 4.0 MBS were 2/32nds (0.06) lower at the same time at 101-22 (101.68).

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