MBS Underperform 10’s, But Holding Steady Ahead of Auction

Posted To: MBS Commentary

As has been the case so many times of late, MBS are holding steady while benchmarks are trending. Fannie 3.5’s are basically trading at opening levels while 10yr yields continue a 2-day downtrend. The discrepancies are very slight, but it was same yesterday: MBS honed in on opening levels from 2pm on while 10’s improved slightly. Yesterday looked as if it would favor the short end of the yield curve, and indeed it did, both heading into the open and briefly following the 3yr auction, but the longer end fought back to a pivot point around 171bps (between 10’s and 2’s) and is currently at 1.6968. But that flattening trend is now contending with some technical resistance in outright 10yr yields as well as a potential pre-auction concession. The resistance is seen in the triangle below: There’s…(read more)

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