After falling to their lows of the day around 11am, MBS bounced at 103-19 and regained their footing at 103-21. They’ve been reasonably well-supported at those levels since then with the “demand” side of the equation better-represented than the “supply” side for the first time today (neither have been particularly weak, just that the market is better bid than offered, finally).
Broader bond markets are now looking determined to go sideways into the close. 10yr yields have bounced noticeably on both sides of a range between 1.963 and 1.953 several times since 11am. Up until then, stock prices and TSY yields had been doing a good job of following each other (stock lever connected). Now that stocks are selling off a bit, bond markets are still sideways, essentially showing us their true intention to hover around current levels regardless of external cues.
Things are pretty uneventful really, with tomorrow’s FOMC events on everyone’s mind. We wouldn’t expect too much drama between here and lock-cut-offs but can’t rest completely at-ease with prices near their lows and late-day illiquidity making it easier for fewer trading dollars to have a bigger impact on price levels.