MBS RECAP: NFP Fires! QE3 Shield Sustains Moderate Damage

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Posted To: MBS Commentary

MBS Live : MBS Afternoon Market Summary Today's jobs report did a good amount of damage to broader bond markets, though MBS prices managed to withstand the barrage with more composure. This " relative outperformance" is a fair expectation given that the Fed's most recently announced quantitative easing measures provide an effective shield for MBS specifically in the form of an extra $40 bln a month in bid-side support. But as we've noted, the only thing truly guaranteed by Fed MBS purchases is that MBS stay nice and tight to Treasury benchmarks. If we embark on a big enough move higher in yield, mortgage rates still suffer. With a string of historically ugly Octobers behind us, the question of whether or not this one gets similarly ugly is set to be answered next week, and if it does, the strength...(read more)

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