Modest Gains, But Huge Moves in Rate Sheets

Abstract

Modest Gains, But Huge Moves in Rate Sheets By the end of the week, the power of MBS coupon stack compression combined with healthy bond gains to deliver some of the biggest rate sheet improvements of the past several decades. Bonds started the day in weaker shape, but turned a corner after the morning data. Initial knee-jerk pullback after 830am inflation data, but bonds now at better levels than before the data. MBS down about an eighth, but illiquidity is distorting reality. Additional gains heading into the end of the EU session. 10yr now DOWN 2.7bps at 2.645 and MBS up 6 ticks. More gains for MBS. Best levels of the day with 4.0 coupons up nearly a quarter point.