What Happened Last Week?
Wild Ride for MBS as Traders Digest New Developments
Experts may have been looking to last week’s jobs report as the biggest potential source of volatility, but that changed on Thursday afternoon after Trump’s $200B MBS buying announcement. Treasuries have only been able to watch from the sidelines. At one point Friday morning after the jobs data, Treasuries were several bps weaker while MBS were in the midst of their biggest rally in months (up more than a half point at the time). There was a rapid “distribution” phase following the initial rally, but prices bounced back to end the day up about a quarter point. Higher coupons are getting no love as they are not assumed to be in fashion as the new buying commences. Details continue to matter, but based on volume and volatility, MBS traders are taking this very seriously.
Source: Matthew Graham, Mortgage News Daily 1/9/26)
What’s on the Agenda for This Week?
Three Things
The three areas that have the greatest ability to impact MBS backend pricing this week are: (1) Geopolitical, (2) Inflation Nation and (3) The Talking Fed.
(1) Geopolitical: There were huge upward swings in pricing last week due to geopolitical events. The long bond market will continue to be very sensitive to this area.
(2) Inflation Nation: CPI will be on Tuesday, and PPI twice (two months’ worth) on Wednesday.
(3) The Talking Fed: At the end of this week, the Fed will enter their media blackout period leading into the January FOMC Meeting. There will be a ton of speakers this week, along with the Fed’s Beige Book.
Treasury Dump
Here is this week’s Treasury auction schedule.
- 01/12: 3-year note
- 01/12: 10-year note
- 01/13: 30-year bond
Market Wrap-up
Treasury Dump: There were two note auctions today. The 3-year note saw $58B go off at a high yield of 3.609% and a bid-to-cover ratio of 2.65. The 10-year saw $39B go off at a high yield of 4.173% and a bid-to-cover ratio of 2.55.
On Deck for Tomorrow: ADP Weekly Payrolls, CPI, Core CPI, New Home Sales, 30-year Treasury bond auction.