Light Participation Limits MBS Gains as Treasuries Shrug Off Weak Auction

Today’s 7yr Treasury auction was one of the only actionable items on today’s calendar.  It came out much weaker than expected and, for a moment, it looked like bonds might care.  10 minutes later and buyers had steamrolled through the brief selling pressure ultimately carrying yields to new lows before the 3pm close.  The gains reinforce  the range-bound trading themes of the week with yesterday erring toward the weaker levels and today taking things back in the other direction.  MBS didn’t manage to make intraday gains at the pace suggested by Treasuries as ultra light liquidity led to a constant questioning of reality.  More on that in today’s video.

Econ Data / Events

7yr Treasury Auction 

3.89 vs 3.87 forecast
Bid to cover lowest since Dec, 2021

Market Movement Recap

08:41 AM Modestly stronger overnight and not much volatility.  10yr down 4.7bps at 3.791.  MBS up 10 ticks (.31).  

11:44 AM Sideways to slightly stronger still.  10s near best levels, down 6.7bps at 3.773%.  MBS still up 10 ticks (.31) 

01:04 PM Losing some ground after weaker 7yr Treasury auction.  MBS down a quick eighth of a point, but still up about a quarter point on the day.  10yr yield up a quick 1.5 bps to 3.769 but still down 7+ bps on the day.

02:25 PM Back at best levels of the day with 10yr down 9bps to 3.748 and MBS up 3/8ths of a point. 
Source: Mortgage News Daily