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Treasuries underwent a bearish steepener on Monday. The yield on the 2-year ended the day unchanged, while the yield on the 5- and 10-year rose by 3-3.5 basis points. Price action seemed to reflect some followup to Friday’s selloff. The short end shrugged off the implications of the Fed’s announcement that it will include money-market funds for reverse repo transactions undertaken to drain reserves from the financial system.
Mortgages had a decent session, outperforming and 10s by between 4 and 6 ticks, duration-neutral. Bloomberg noted that the 30-year current coupon spread narrowed to its lowest recorded level versus the 10-year Treasury, although spreads to swaps remain outside their historic lows. 3/8/10 MBS Closes
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