MBS RECAP: MBS Outperform as Treasuries Digest Supply

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Posted To: MBS Commentary

The bond market took a pass today as traders generally let supply considerations and positioning rule the day. Supply considerations came courtesy of the 7yr Treasury auction (also the last of the week's auctions). The auction itself had fairly average stats, but primary dealers (who are forced to submit bids) were left holding a bigger piece of the bag than normal. Thus, they had more bonds to sell (or opportunistic traders assumed they'd have more bonds to sell in the near future and thus tried to get ahead of the trade by selling). Either way, the 1pm time frame (when the auction happened) saw a bit of additional selling pressure. This was largely confined to Treasuries, however, as MBS were able to maintain a mostly sideways grind on the day. Incidentally, the stronger Durable Goods…(read more)

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