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Bond Rally Reignited as Italian Election Outlook Accelerates

This morning, when we merely had an interim Prime Minister in Italy and the prospect of new elections in roughly 6 months, that was one thing.

About 30 minutes ago, new headlines suggested he may not form an interim government.  That would accelerate elections, but I couldn't tell you by how much.

Just a few minutes ago, another headline hit the wires suggesting he may not even stick around at all, with the implication being elections before the end of July:

ITALY'S PM-DESIGNATE CONSIDERING GIVING UP MANDATE, ALLOWING FOR A POSSIBLE ELECTION ON JULY 29

The spread between German and Italian 10yr notes has moved roughly 30bps during this time.  German Bund yields have fallen 7bps and US 10yr yields have fallen nearly 6bps.  That brings the day's total rally in the 10yr past the 10bp mark to yields of 2.826%.  Fannie 4.0 MBS are up 3/8ths of a point and lenders are merely waiting for things to level-off before deciding on positive reprice amounts.

MBS / Treasury Market Data

UMBS 5.5
99.56
-0.09
UMBS 6.0
100.97
-0.05
2 YR
4.6013
+0.0333
10 YR
4.2013
+0.0133
Pricing as of: 3/28 10:09AM EST
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