The MBS market did an about face from the revelation that was May’s outperformance as June swooned and returns sagged. The June FOMC saw the Federal Reserve hike rates by 75bps, as expected, however the ongoing rush of inflation dented most all markets.
Rates and yield curve slopes were at their most pronounced one day before the June 15th announcement, as the 2s10s curve flattened into negative territory (-0.10) and 10yr yields rose to near 3.50%. Post-announcement, the curve re-steepened a few bps to its present-day level (+5), while 10yrs rallied 50bps and ultimately inside 3.00%. Vols were equally as disruptive, with benchmark 3m10y measures opening June +98.70, peaking pre-FOMC to +133.8, before a modest retracement back nearer its beginning point (+119 context).
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