MBS lost ground late yesterday as the market reacted to a Financial Times article claiming the Fed may end asset purchases sooner than later. The Dow Jones Industrial Average increased 103.59 points (0.69) while the Nasdaq also jumped 23.17 points (0.67). Also, the S&P 500 rose 8.16 points (0.50).
10-year yields fell from a 14-month high last week amid skepticism policy makers are moving toward reducing bond buying.
Treasuries gained for a second day as some investors got a hold of themselves and realized that headlines proclaiming the Fed will slow its bond buying program sooner than later are speculative.
Treasuries gained over night as the World Bank cut its global growth forecast, fueling demand for safer assets.
The market rallied yesterday as news from Asia caused investors to seek safer assets. The bond market made up for losses incurred early this week, moving back to Thursday’s levels.
Treasuries fell for a third day ahead of the three-year auction today. Speculation the Federal Reserve will consider reducing bond purchases still drives market volatility this week.
Friday’s payroll numbers had the potential to move the market if they were weak enough, however the numbers did an almost perfect job of avoiding any clear suggestion of clear economic recovery.
U.S. employers added 163,000 jobs in May, down from 165,000 in April. If employment numbers continue to be strong, the Fed may have more confidence ending its bond purchases sooner than later.
Ten year treasuries rose yesterday, however, the gains did not translate into improved pricing for MBS.
Treasuries advanced early this morning as stocks declined around the globe, increasing demand for safer assets.