The bond market seems to be defying gravity despite all kinds of reasons to trade towards higher yields.  One reason the Treasury market seems to have found support is that the SIFMA (Securities Industry and Financial Markets Association) is reporting 700 billion in fails to receive/deliver mortgage backed paper.  Throw in 70 billion that FNMA and FHLMC bought back in February (delinquent buyback program) and you have a number of investors scrambling to hedge up positions in fixed income portfolios.  On a go forward basis, FNMA and FHLMC are expected to buy back another 150 billion.  Accelerating prepayment speeds has also given the fast money types a reason to back MBS and flip to another asset class (treasuries) with a more predictable prepayment speed.  All of the above will make the set up into Friday’s payroll numbers a dicey affair.

Borrowers are best to take advantage of any price improvement by Thursday afternoon.  Technically, the buying looks suspect because it is not endorsed by any daily study turning bullish.  All are neutral, telling us that all we’re doing is rattling around in the range.