3/11/10

Most rate prices backed off a bit from yesterday’s re-price as mortgage bonds keep playing back and forth in a narrow range. This tightening is a bit baffling given the Fed’s impending departure from buying as low volatility and low supply appear to be keeping the convexity players and higher yield seekers at bay—for now. This morning we are seeing some pull back to the upper coupons and more selling in the lower so rate sheet rates are under pressure. Today brings the final installment of this week’s auctions with an offering of $13 Billion in 30 year-notes. Yesterday’s 10 year was so-so but good enough to help MBS perform well. Those additional gains have been wiped out so far this morning but let’s see what the auction results around 10am will bring. Stocks are trimming earlier losses as gains in large cap tech shares offset worries about money tightening in China. Better than expected trade balance and jobless claim data was released today with little effect on markets.