Overnight, Treasuries sold off and the curve steepened on the back of rising equitymarkets. In the U.S., the market is opening slightly higher while MBS pick up from where they left off last night. With limited supply and 10-Year notes settling into the range there has been robust demand from money managers, pension funds, banks, REITs and Uncle Sam. As the Fed continues to mop up $85 billion a month of Treasuries and MBS it is important to remember that technicals will favor MBS in the short term. With rates creeping above 4.5%, supply has fallen to 1/3 of the daily run rate while the Fed continues to purchase at the same pace (they are buying a larger percentage of origination). This coupled with bearish positioning in the market should be a positive for MBS assuming we settle into a range and volatility decreases. At 10:00 AM EST the JOLTs Job Openings will be released (3800 expected).
At 11:00 AM EST there is a UST buyback in the 8/20-5/23 sector and at 1:00 PM there is a $32 billion 3-Year note auction.
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