Illiquid market trading is pushing the market around this morning. We started the day with the 10 year note up 8/32’s, trading at a yield of 3.17%. However, within the last few minutes, traders have turned sellers in treasuries and mortgage backed securities. Currently, we are off 17/32’s on the note (yield 3.26%) while MBS has slipped 7/32’s from the level we priced at.
Fast market action with thin volume can and is whip sawing the price action. Stocks have been down all morning, currently off 140 points on the big board. If you open up the daily chart on the note, you can see the bearish trend line that has developed. Every time we try to take it out on a rally, market forces sell it off. This is not friendly to MBS pricing.
Earlier today, Weekly Unemployment Claims fell 12K but Continuing Claims rose to a record high for the 16th week in a row. Normally, this would be a net positive for our pricing but in our opinion, the upcoming holiday weekend is responsible for illiquid, volatile price action.