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  • MBS and Treasuries Holding Narrow Ranges at Best Levels    MND Micro News  - 6 hrs, 46 mins ago

    Today continues to be wholly uneventful for bond markets.  After beginning the domestic session just barely inside yesterday's weakest levels, both MBS and Treasuries have simply been drifting sideways and slightly higher in price (lower in yield).

    To reinforce the notion that this is uneventful, MBS still haven't broken into positive territory with Fannie 4.0s down 1 tick on the day at 104-15.  10yr yields are just about 1bp higher than yesterday at 2.6373.

    That said, MBS are an eight of a point higher from the time of day that some lenders released their first rate sheets.  As such, positive reprices are an outside possibility for a few of those lenders, but an eighth of a point is really only the threshold beyond which reprices become possible. 

    It would take a bit more positivity to make them 'probable' outside the one or two lenders that reprice most aggressively.  Additionally, as of right now, we haven't moved past that threshold.  Uneventful...

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  • Stronger Manufacturing Data Gives Bond Markets Pause    MND Micro News  - 11 hrs, 55 mins ago

    Industrial Production and Capacity Utilization data came out stronger than expected just now.  Here's the run-down:

    • March Industrial Output +0.7 vs +0.5 forecast
    • Big revision in February to +1.2 from +0.6 previously
    • Capacity Use Rate 79.2 vs 78.7 forecast, highest since June 2008

    10yr yields moved relatively quickly to their highest levels of the day.  MBS mimicked the move with less conviction, but are still falling on the data.  Fannie 4.0s are currently down 5 ticks at 104-11 and Fannie 3.5s are down 6 ticks at 101-03.

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  • Holding Ground in Weaker Territory After Lackluster Housing Data    MND Micro News  - 12 hrs, 31 mins ago

    Bond markets were weaker overnight, further backing away from the geopolitical risk-driven rally that took place yesterday morning.  Stronger Chinese GDP also helped markets move back towards 'risk' (stocks and bond yields higher). 

    By the open, 10yr yields and MBS were both almost perfectly back in line with yesterday's weakest levels.  So far, they've gone no higher thanks to a weaker-than-expected reading on Housing Starts. 

    • March Housing Starts 946k vs 973k forecast
    • February Housing Starts revised to 920k from 907k
    • Housing Permits 990k vs 1008k forecast
    • singe-family permits and starts rose while multifamily fell

    MBS and Treasuries both improved just slightly following the data and are currently at their best levels of the morning.  Stocks are at their weakest levels of the morning--a fact that further helps bond markets in the current environment (where the stock lever has been so well connected).

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  • MBS LIVE ALERT Issued: Learn more about MBS Live MBS Live  - Tue, Apr 15 2014, 2:56 PM
  • MBS LIVE ALERT Issued: Learn more about MBS Live MBS Live  - Tue, Apr 15 2014, 2:11 PM
  • MBS Now Above Yesterday's Highs; Ongoing Positive Reprice Potential    MND Micro News  - Tue, Apr 15 2014, 12:57 PM

    Ukraine, as a market mover, went from a distant memory yesterday to 'front and center' for most of today.  As global financial markets weigh the prospects of civil war--chiefly the involvement of larger nations like the US and Russia--bond markets have rallied strongly and stocks have sold-off.

    Treasuries, which benefit more from such flight-to-safety trading, had already broken below yesterday's low yields.  MBS have now joined them in breaking yesterday's best levels, though they continue to lag overall (which is normal in these cases). 

    Still, the incremental improvements make positive reprices incrementally more likely.  We're in a situation now where if you haven't seen a reprice yet, you almost certainly will.  Fannie 4.0s are up a quarter of a point at 104-20 and Fannie 3.5s are up 10/32nds at 101-16.

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  • Bond Markets Jump into Positive Territory    MND Micro News  - Tue, Apr 15 2014, 10:35 AM

    After wallowing around in negative territory all morning, MBS and Treasuries have precipitously moved into the green.  Stock markets are taking part in the move as well.  The timing doesn't line up with any economic data or market events, and thus is assumed to be linked to headlines out of Ukraine.  To a lesser extent, news of a potential pipe bomb in Boston may have contributed to the flight-to-safety.

    At this point, however, the pipe bomb story looks to be resolved (though it was just making the rounds when the move began).  Ukraine headlines, however, are ongoing, and suggest at least a possibility of imminent violence.

    Fannie 4.0s are now up 3 ticks on the day at 104-16 and 10yr yields are down 1.6bps at 2.625. 

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  • Bond Markets Holding Ground at Slightly Weaker Levels After Data    MND Micro News  - Tue, Apr 15 2014, 8:51 AM

    There hasn't been a decisive move in MBS or Treasuries yet, following the 830am economic data.  If you had to assign a label, it's probably "sideways" for now.  The only downside is that bonds were slightly weaker overnight, confirming yesterday's late weakness in MBS.

    The losses haven't been extreme with Fannie 4.0s down only 2 ticks on the day.  10yr yields are up 1.6b3 ps at 2.655--under the 2.663 highs from earlier this morning.

    The economic data was a mixed bag with inflation being slightly hotter than forecast and the NY Fed Manufacturing numbers being weaker.

    CPI

    • +0.2 vs +0.1 forecast 
    • Core CPI (excludes food and energy) +0.2 vs +0.1 forecast
    • Year over year Core CPI +1.7 vs +1.6 forecast

    Markets looked like they might have been reacting to the traction in inflation data right at 8:30am, but perhaps the lackluster manufacturing data helped balance the outlook.

    Empire State Manufacturing

    • +1.29 in April vs +8.0 forecast, +5.61 in March
    • Employment Index +8.16 vs +5.88 in March
    • 6-Month Outlook +38.23 vs +33.21 in March

    The next data this morning will be the NAHB Housing Market Index at 10am.

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  • MBS LIVE ALERT Issued: Learn more about MBS Live MBS Live  - Mon, Apr 14 2014, 4:19 PM
  • MBS Bouncing Along Lows; Modest Reprice Risk Remains    MND Micro News  - Mon, Apr 14 2014, 2:19 PM

    Nothing about trading levels has changed since 11am as MBS continue to bounce along at the lowest prices of the day.  On a positive note, they've done a good job of not breaking any lower.  On a negative note, the losses are right around an eighth of a point for some lenders depending on the time of day they generated rate sheets.

    While that suggests most are not at great risk of negative reprices, it also means it can't be ruled out for others (a few already have).  On a qualitative note, losses today would break the recent streak of steady-to-lower rates for the past 6 sessions.

    Reprice risk would increase if Fannie 4.0s move below 104-14 or if Fannie 3.5s move below 101-06.  Technical support at 2.656 in 10yr yields also seems worth glancing at as that's where yields held firm twice this morning (currently 2.643).

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  • MBS LIVE ALERT Issued: Learn more about MBS Live MBS Live  - Mon, Apr 14 2014, 10:54 AM
  • MBS Rally Back to Unchanged As Stocks Fall    MND Micro News  - Mon, Apr 14 2014, 9:58 AM

    Stocks and bonds haven't been perfectly connected all morning, but are generally moving in the same direction at the same time.  As such, bond markets did a good job of battling back against earlier weakness when stock futures shied away from a stronger rally on the Retail Sales data.

    When stocks hit the 'cash' open at 9:30am, they fell below their 8:30am levels implied by futures.  Bond markets mirrored the move, with MBS rising back above 8:30am levels.

    Both MBS and Treasuries are now at their best levels of the morning.  Fannie 4.0s are unchanged from Friday's latest levels at 104-19 and 10yr yields are still slightly weaker at 2.63.

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  • Bond Markets Weaker after Retail Sales Data    MND Micro News  - Mon, Apr 14 2014, 8:39 AM

    Bond markets are off to a weaker start this morning thanks to a combination of modest losses overnight (stocks and bond yields bounced higher together) and additional selling pressure after a stronger-than-expected Retail Sales report.  Fannie 4.0s are down 4 ticks at 104-15 and Fannie 3.5s are down 6 ticks at 101-06.  10yr yields are up 3.1bps at 2.6. 

    Retail Sales

    • +1.1 vs +0.8 forecast, biggest rise since Sep 2012
    • Excluding Autos/Gasoline +1.0 vs +0.4 last month

    The only other economic data this morning is Business Inventories at 10am, which isn't typically a market-mover.  Of greatest concern at the moment is the fact that this post-data weakness is a vote in favor of the potential technical resistance discussed in this morning's commentary.

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  • Reprice Risk on Hold Along with Stock Rally    MND Micro News  - Fri, Apr 11 2014, 12:24 PM

    After spending the morning trading mostly sideways Treasury yields and stocks broke higher into the 11am hour.  This brought MBS just barely into their weakest levels of the day, but right on the edge of negative reprice risk for some lenders who were looking at 4 ticks (.125) of weakness since their first rate sheets.

    We've pulled back from that 'edge' by at least 2 ticks now (2 for Fannie 4.0s and 3/32nds for Fannie 3.5s).  Stocks and bonds continue sticking close to each other.  Bonds are right back in yesterday afternoon's range.  There's little else to report until/unless stocks  start making bigger moves.

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  • MBS LIVE ALERT Issued: Learn more about MBS Live MBS Live  - Fri, Apr 11 2014, 10:59 AM
  • Consumer Sentiment Stronger Than Expected; Limited Reaction so Far    MND Micro News  - Fri, Apr 11 2014, 10:02 AM

    Here's the run-down on the just-released Consumer Sentiment data:

    • Headline sentiment for April 82.6 vs 81.0 forecast, 80.0 in March
    • 'Current Conditions' 97.1 vs 96.3 forecast
    • 'Expectations' 73.3 vs 71.4 forecast
    • All of the above are at the highest levels since at least August of last year

    10yr yields and MBS are both close to unchanged compared  to pre-data levels, but modest amount of movement seen has been weaker (as the stronger economic data would suggest).  That said, the overall reaction suggests markets aren't overly concerned with this report.  If we move, it will be for other reasons.

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  • Stronger Overnight, but Sideways After PPI; Waiting for Stocks' Next Move    MND Micro News  - Fri, Apr 11 2014, 9:16 AM

    Bond markets were unchanged for most of the overnight session, but began moving with equities around 5am.  10yr yields fell from the 2.65's to just under 2.61 between 4:40am and 8:20am--a fairly big move for any 4-5 hours, let alone those falling in the overnight session.

    MBS opened at stronger levels as a result, but remained within yesterday's trading range. 

    The morning's first economic data--Producer Prices--came in stronger than expected.

    • March PPI +0.5 vs +0.1 forecast, biggest rise since June 2013
    • Core PPI +0.6 vs +0.2 forecast, -0.2 in Feb
    • Year over year +1.4 vs +1.1 forecast

    This flies in the face of the 'deflationary panic' that is credited with some of strong movement in bond markets over the past few days.  As such, the morning rally paused when the data came out, and even took a few steps back. 

    There hasn't been a 180 degree turn though.  Instead, both MBS and Treasuries have been sideways at slightly stronger levels, ostensibly waiting to see what happens with the cash open in stocks about 15 minutes from now.

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  • MBS LIVE ALERT Issued: Learn more about MBS Live MBS Live  - Thu, Apr 10 2014, 4:26 PM
  • MBS LIVE ALERT Issued: Learn more about MBS Live MBS Live  - Thu, Apr 10 2014, 2:19 PM
  • Surprisingly Decent 30yr Bond Auction; Delayed Gratification for Bond Markets    MND Micro News  - Thu, Apr 10 2014, 1:20 PM

    While it hasn't made for any significant selling pressure in MBS, the 30yr Bond Auction results didn't prompt much additional positivity (not at first anyway).  That's counterintuitive consider the bid-to-cover and awarded yield were both better than recent averages, which is even more impressive given the fact that the auction happened at the day's strongest levels after a significant rally (all things being equal, markets tend to favor slight weakness in the bonds that are about to be auctioned, with a slight recovery in the event of an average-or-better result).

    The easiest explanation is that today's market movement isn't too concerned with Treasury supply, and is instead driven by big, archetypal trades favoring safety vs risk.  This can create a good amount of momentum in multiple asset classes and today is no exception.  S&Ps are down 30 points.  Euros and Yen have rallied immensely, as have MBS and Treasuries.  The end of the week's Treasury supply burden isn't really a cause for celebration when bigger fish are already in the process of being fried.

    That said, here at the 15 minute mark, bonds are breaking into stronger territory.  It's tough to say whether this has anything to do with the auction.  It probably does not, but the auction being over certainly doesn't stand in the way of more tradeflow-based positivity.  There are also more QE headlines out from the ECB just now.

    MBS are at the day's best levels, up nearly half a point at 104-25 and 10yr yields are down 6.5bps to 2.62. 

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  • Snowball Buying Increases for Bonds; Positive Reprice Potential is Ongoing    MND Micro News  - Thu, Apr 10 2014, 11:37 AM

    The moderate positive reprice potential mentioned in the last update is now full-fledged as bond markets embarked on an exponentially stronger run.  Both MBS and Treasuries moved well into their best levels of the day as S&P futures shed a fairly abrupt 15 points since the open.

    Any lenders who have not yet repriced stand a good chance of doing so.  Even the late-pricing crowd is looking at better than 6 ticks of improvement since initial rate sheet.  Several lenders are already out with reprices.

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  • MBS and Treasuries Breaking into Day's Best Levels; Some Early Reprice Potential    MND Micro News  - Thu, Apr 10 2014, 10:32 AM

    While bond markets coped with a bit of weakness immediately following the stronger-than-expected Jobless Claims data, the supportive undertones we noted in the morning update ended up marking the extent of that weakness (i.e. 10yr yields did indeed treat the 2.68's as an overhead support level).

    10's were at their weakest levels for the last time right as stocks opened and have gradually improved since then.  MBS have been improving since 9am and are currently up 6 ticks on the day, with some lenders seeing as much as a 5 tick gain from initial rate sheet print times.  That means positive reprices are technically possible for a few of the early lenders, but would become more probable with a few more ticks of improvement, or more time spent holding current levels.

    The extent to which bond markets are willing to rally strongly ahead of an afternoon Treasury auction is questionable, but that would leave a post-auction relief rally as a possibility. 

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  • Bond Markets Giving Up Overnight Gains After Stronger Jobless Claims    MND Micro News  - Thu, Apr 10 2014, 8:40 AM

    Treasuries made quite a strong move overnight, making it all the way into the 2.65's in 10yr yields.  While some of those gains were already being given up into the domestic session, it looked as if bond markets would have been willing to go either direction after the 8:30am data.

    With Jobless Claims coming in stronger (300k vs 320k forecast) and continued claims dropping below 2.8m, the first reaction is a moderate move toward weaker levels for Treasuries and MBS.  10yr yields are up to 2.675 from 2.665 just before the data (2.6501 overnight).  MBS are only 2 ticks off their highs (104-13 vs 104-15 in Fannie 4.0s).

    Despite the move higher, we're already seeing signs that it might stay contained.  Not only was the initial pop on the small side, but it's clearly meeting some resistance now.  If this morning's high yields continue to hold, that would be a very positive sign from a technical standpoint (making the 2.68 level discussed in the 'day ahead' act as a pivot point instead of a resistance level).

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  • Bond Markets Improve Following FOMC Minutes    MND Micro News  - Wed, Apr 9 2014, 2:12 PM

    As expected, there is generally no new information in the FOMC Minutes beyond what has already been gleaned from the Announcement and speeches.  Given that the day of the announcement marked a sell-off for bond markets, it stood to reason that any attempt to balance the perceptions from that day would be positive for bond markets, and that's what we're seeing in the Minutes.

    Of particular note are the following snippets:

    "Most participants also believed that, as part of the process of
    clarifying the Committee's future policy intentions, it would be
    appropriate at this time for the Committee to provide additional
    guidance in its postmeeting statement regarding the likely behavior of
    the federal funds rate after its first increase."  (clarity is good for markets)

    " A number of participants noted the overall upward shift since December
    in participants' projections of the federal funds rate included in the
    March SEP, with some expressing concern that this component of the SEP
    could be misconstrued as indicating a move by the Committee to a less
    accommodative reaction function."

    In other words, the Fed is saying "that thing you guys thought justified a move higher in rates isn't exactly the best glimpse at our intentions.  As such, we'll not only tell you that, but also tell you we plan to communicate that better next time."

    Bond markets like it, but not enough to get back to yesterday's best levels.  MBS are back to unchanged on the day and about an eighth of a point higher than morning rate-sheet print times.  If we're able to hold here or improve, some aggressive lenders might consider positive reprices.  Holding or improving is still up in the air.  Momentum has been sideways since the first initial pop into stronger territory.

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  • Bond Markets Weaker After 10yr Auction    MND Micro News  - Wed, Apr 9 2014, 1:13 PM

    The bid-to-cover of today's auction was slightly higher than average, but well under the previous auction (2.76 vs 2.92 previously).  In and of itself, that's not too bad, but the awarded yield was .5bps higher than the 1pm when-issued yield. 

    The first move for bond markets has been into weaker territory with 10's moving up to 2.717, about 1bp higher than before the auction.  MBS are only down 1 tick from pre-auction levels, and haven't moved enough for serious reprice risk to develop. 

    FOMC Minutes are coming up at 2pm, and although market participants aren't expecting any surprises, the news always carries potential for market movement.

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  • 10yr Auction Preview    MND Micro News  - Wed, Apr 9 2014, 12:57 PM

    Bond markets have been fairly docile all morning, and the first opportunity to see more of a reaction now arrives with the 10yr Note Auction at 1pm. There are two key metrics we can observe to get a sense of the auction's strength: demand and the yield.

    Demand is measured by the bid-to-cover ratio or BTC. The benchmark for today's auction can be taken from recent averages of the BTC from past auctions. With that in mind, 3 of the last 4 reopenings were in a range of 2.58 to 2.68, but the most recent auction was stellar, with a 2.92 BTC. Anything in the 2.6's is good. Anything more is gravy.

    The yield is measured by the "High Yield's" relationship to the 1pm "when-issued" yield. This is basically just a way for markets to trade the security before it's actually been issued, and varies slightly from the normal Treasury yields seen on your screens. The 10yr WI is currently at 2.715, but may change slightly before 1pm.

    If the "high yield" is higher than the 1pm WI, that's bad. Lower is good. The auction bidding cut-off is at 1pm, but results typically come out 90 seconds later.

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  • Bond Markets Weaker Overnight, Mostly Holding Ground This AM    MND Micro News  - Wed, Apr 9 2014, 9:27 AM

    In addition to the roll which accounted for a 12 tick drop in prices, Fannie 4.0s are down another 5 ticks this morning, which is anywhere from normal to strong considering 10yr yields are .0288  higher.

    The overnight session was uneventful for Treasuries in the sense that there were no scandalous headlines or economic reports that caused big movement.  Instead, bonds simply turned weaker.  Part of the weakness is the exhaustion of tradeflow momentum, meaning that the snowball buying seen yesterday finally ran out of snow.

    The other piece of the market-movement puzzle is equities markets.  After being more disconnected yesterday, stocks and bonds are once again tracking well with each other overnight and into the stock market open at 930am.

    The big events today will be the 10yr Note Auction at 1pm and FOMC Minutes at 2pm.  These are 'big' in the sense of POTENTIAL, but aren't necessarily guaranteed to cause a stir.

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  • New Highs Following 3yr Auction (Not Necessarily Because of it); Positive Reprices    MND Micro News  - Tue, Apr 8 2014, 1:12 PM

    The 3yr Treasury auction was a relative non-event, with demand very much in line with recent averages, and an awarded yield perfectly in line with the 1pm expectation. 

    This doesn't make much of a statement about the current momentum, or lack thereof.  Bond markets had been trending positively essentially all morning, and simply continue to do so following the auction.  MBS continue to outperform Treasuries, though the latter finally moved into positive territory.

    Several lenders have already repriced positively.  That's an ongoing possibility while current levels are held or improved upon.

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  • Bond Markets Weaker Overnight; MBS Back in the Green, but Remember the Roll    MND Micro News  - Tue, Apr 8 2014, 9:06 AM

    With yet another session devoid of market-moving data or events, Treasuries and MBS are left to take their cues from other markets and from tradeflow considerations.  The overnight session was weaker after central banks in Japan and Europe were generally unenthusiastic about QE.  Japan was outright dismissive whereas the ECB simply noted that last week's news about a €1 trillion stimulus package was simply a matter of preparation with actual QE being undecided and not yet close to happening.

    There were no major market reactions to that central bank news, however.  It merely stands as a backdrop for the uneventful weakness.  10yr yields moved up from a 2.703 close to open just over 2.71 today.  Fannie 4.0s were only down 3 ticks at the open and are already back to unchanged.

    Keep in mind, that "unchanged" in MBS isn't exactly "unchanged" as the roll is after the close tonight.  That means the displayed prices on MBS will switch from April coupons to May.  That will make it look like prices have dropped though we're simply shifting our viewfinder to highlight the next bucket of MBS on the assembly line, which have always been trading at lower prices.

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  • Still Holding Gains, Still Moving When Stocks Move    MND Micro News  - Mon, Apr 7 2014, 3:03 PM

    Bond markets continue to enjoy a solid improvement on the day with 10yr yields down 3bps and Fannie 4.0s up 8 ticks.  MBS were another 2 ticks higher at their best levels of the day, but bounces in stocks have been seen as minor corrections in bond markets. 

    For now, although stocks moved on to lower lows, the 12:20pm bounce marked the day's best levels in Treasuries.  MBS, however, moved on to just slightly stronger territory as stocks hung around their lows from 130-230pm. 

    Bottom line: bond markets are moving when stocks move, although the magnitude can vary.  Positive reprice potential is ongoing if you haven't seen one yet. 

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