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MBS Day Ahead: Slightly Weaker Today, But It's Not as Bad as it Looks

Posted To: MBS Commentary

Slightly weaker?! How could we say such things when the MBS chart looks like this: Don't worry. This isn't exactly "real" due to the roll . The prices on the June 10th side of the chart are for the now-retired June coupons whereas the prices on the June 11th side of the chart are for July coupons. July coupons have been trading for a few months and their prices have always been a bit lower than June's. So about half of the weakness seen on the chart is not really there. If there were no roll, the chart would look more like this: In terms of Treasuries and big-picture momentum, yesterday's rally took us to the best levels in months. As we've been saying for the past few days, the strong post-payrolls momentum will eventually set up a selling opportunity. So we have…(read more)

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