MBS Day Ahead: Treasuries Outperforming, But MBS Holding Steady

Posted To: MBS Commentary

The recent trading range has been reinforced after a strong show of support in this week's Treasury auctions. Treasuries were under more pressure heading into that process and are breathing a bigger sigh of relief coming out of it. In visual terms, this can be seen as a ceiling bounce around .735 and now in a break below the recent uptrend in yields. MBS are not unhappy , however, and neither are rate sheets. It's reassuring to see MBS spreads continue to operate in this narrow range even as the Fed has reduced its daily buying to $5bln (blue line is the gap between MBS yield and 10yr Treasury yield). MBS spreads don't even tell the whole story due to the balance between 2.5 and 2.0 coupons in terms of new loan production. The calculation that feeds the blue line above has to give…(read more)

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MBS Day Ahead: Treasuries Outperforming, But MBS Holding Steady
MBS Day Ahead: Treasuries Outperforming, But MBS Holding Steady

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