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MBS Creep Into Positive Territory, Outperforming Treasuries
Posted to: Micro News
Tuesday, November 20, 2012 9:32 AM

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Fannie 3.0s are up 1 tick at 104-31+ at the moment, despite 10yr yields trading in slightly weaker territory vs yesterday. Bond markets kicked off the overnight session in marginally stronger territory as Asian markets gave some credence to a Moody's downgrade of France. But the downgrade trade was faded at the onset of the European session, helped along by a strong short term debt auction in Spain (where we're told that rain falls mainly on the plain).

The European hours saw US 10yr yields drift from the mid 1.60's to 1.635 at 7am. Stock futures were mostly in lock-step overnight, suggesting a broad "risk-on" movement, but one that has thus far been clearly limited by yesterday afternoon's highs, at least as far as S&P futures are concerned. We're reluctant to read much at all into these generally lower volume "holiday week" hours and advocate the same.

That said, tomorrow could be a busier day and we can't completely ignore the fact that broader bond markets are giving the impression--at least from a technical perspective (sans volume)--that they're in the process of bouncing into weaker territory. This may or may not prove to be a concern by tomorrow afternoon as we could just as easily be leveling off in a sideways range between 1.65 and 1.55 in 10yr yields / 104-20 to 105-08 in Fannie 3.0 MBS.

The small amount of weakness in Treasuries so far this morning is very much a product of the overnight session as we've been trading fairly well despite stronger-than-expected Housing Starts data. Stock futures and TSY yields were already on the rise coming off a minor technical bounce ahead of the 8am hour.

There are no additional significant economic reports set for today, though Bernanke will speak in the afternoon and the Fed is in at 10:15-11:00am with a scheduled round of "Twist" buying. Here at 9:30am, the first move for cash equities markets has been down nearly 3 points in S&Ps which has helped TSYs hold their ground and MBS to continue flirting with the green.

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Mortgage Rates:
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  • 15 Yr FRM 2.96%
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  • Jumbo 30 Year Fixed 3.62%
MBS Prices:
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  • 30YR FNMA 5.0 110-22 (0-01)
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  • 30YR FNMA 5.5 111-30 (0-02)
Recent Housing Data:
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  • Refinance Index 11.33%
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  • Purchase Index 8.43%