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You are viewing Micro News from Friday, Feb 7, 2014 - View all recent Micro News
  • 2/7/14
    Boring Since NFP; MBS Outperforming

    This is mostly an update for our members who may not be tuned in to the dashboard today and are relying on updates/alerts/mobile to stay up to speed.  Things have been uncommonly boring for an NFP day with MBS holding inside an eighth of a point range since 10am. 

    Whereas Treasuries took a stab at their best levels of the afternoon and moved higher into 2pm, MBS have simply been grinding sideways and slightly higher.  With the exception of the first 30 minutes of volatility this morning, MBS are at their best levels of the day in both 4.0s and 3.5s (up 11 and 13 ticks respectively to 105-00 and 101-19). 

    A lack of supply is the most likely suspect accounting for the outperformance.

    Category: MBS, UPDATE
    Share:   
  • 2/7/14
    Pondering Bond Markets Surprising Lack of Follow-Through on Weak NFP

    As you may have noticed, bond markets have given up the better part of their post-NFP gains over the past hour.  The extent of the pull-back certainly doesn't seem to make good sense at first glance, so let's go over a few potential explanations.  Really, there are only 3, and they're pretty straightforward. 

    The first was actually covered in the first update following the data.  Here's the important part:

    If there's any saving grace for this data, it's the current private payrolls headline which showed 142k jobs created vs a 185k forecast.  If we're to accept that the weather had as much of an impact as some have suggested, this would actually mean today's report is fairly close to consensus. As such, if we see bond markets make no further progress than their initial jolt into positive territory, this might be why.  In other words, the mere POSSIBILITY that weather can explain away some of the gap means there's a chance this isn't weak enough for us to see any further progress.

    Additionally, we can consider that the stock lever remains in play.  Much of the pull-back toward more tempered gains in bonds falls in line with improving stock futures (and now with cash trading since 9:30am).  I'm somewhat hesitant expect too much lock-step connection here though, given that the connection seems to be breaking down a bit in recent days.

    On a final, and most optimistic note, the pull-back could simply be a consolidation before continuing into stronger territory.  We'll have to wait and see on that one, and most likely, we're dealing with the first point above.  Keep in mind, that one still leaves the door open for some bounce back into stronger territory.  It's only point was to explain why the immediate rally may have stopped short of expectations.

    Fannie 4.0s are currently up 8 ticks at 104-29 and 10yr yields are down 1.6 at 2.686.

    Category: MBS, UPDATE
    Share:   
  • 2/7/14
    NFP Much Weaker Than Expected, Bond Markets Rallying, But Thinking About Weather (maybe)

    Here are the details on the data:

    • Nonfarm Payrolls +113k vs +185k forecast
    • December only revised to 75k from 74k previously
    • November revised to 274k from 241k previously
    • Private payrolls +142k vs 185k forecast
    • Unemployment 6.6 pct, lowest since 10/2008
    • Labor Force Participation rate 63.0 vs 62.8 previously
    • Full Release

    The most damning testimony for the economy isn't so much the 113k payrolls this time, though that does hurt.  Rather, it's the lack of revision to last month's horrible 74k payrolls.  Even on the private payrolls front, last month's 87k print only came up to 89k.

    If there's any saving grace for this data, it's the current private payrolls headline which showed 142k jobs created vs a 185k forecast.  If we're to accept that the weather had as much of an impact as some have suggested, this would actually mean today's report is fairly close to consensus. 

    As such, if we see bond markets make no further progress than their initial jolt into positive territory, this might be why.  In other words, the mere POSSIBILITY that weather can explain away some of the gap means there's a chance this isn't weak enough for us to see any further progress. 

    10's shot down to 2.633 from 2.72 immediately but are up to 2.658 currently.  MBS jumped from 104-18 to 104-31 and are holding there.

    Category: MBS, UPDATE
    Share:   
 
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  • 2/7/14

    This is mostly an update for our members who may not be tuned in to the dashboard today and are relying on updates/alerts/mobile to stay up to speed.  Things have been uncommonly boring for an NFP day with MBS holding inside an eighth of a point range since 10am. 

    Whereas Treasuries took a stab at their best levels of the afternoon and moved higher into 2pm, MBS have simply been grinding sideways and slightly higher.  With the exception of the first 30 minutes of volatility this morning, MBS are at their best levels of the day in both 4.0s and 3.5s (up 11 and 13 ticks respectively to 105-00 and 101-19). 

    A lack of supply is the most likely suspect accounting for the outperformance.

    Category: MBS, UPDATE
    Share:   
  • 2/7/14

    As you may have noticed, bond markets have given up the better part of their post-NFP gains over the past hour.  The extent of the pull-back certainly doesn't seem to make good sense at first glance, so let's go over a few potential explanations.  Really, there are only 3, and they're pretty straightforward. 

    The first was actually covered in the first update following the data.  Here's the important part:

    If there's any saving grace for this data, it's the current private payrolls headline which showed 142k jobs created vs a 185k forecast.  If we're to accept that the weather had as much of an impact as some have suggested, this would actually mean today's report is fairly close to consensus. As such, if we see bond markets make no further progress than their initial jolt into positive territory, this might be why.  In other words, the mere POSSIBILITY that weather can explain away some of the gap means there's a chance this isn't weak enough for us to see any further progress.

    Additionally, we can consider that the stock lever remains in play.  Much of the pull-back toward more tempered gains in bonds falls in line with improving stock futures (and now with cash trading since 9:30am).  I'm somewhat hesitant expect too much lock-step connection here though, given that the connection seems to be breaking down a bit in recent days.

    On a final, and most optimistic note, the pull-back could simply be a consolidation before continuing into stronger territory.  We'll have to wait and see on that one, and most likely, we're dealing with the first point above.  Keep in mind, that one still leaves the door open for some bounce back into stronger territory.  It's only point was to explain why the immediate rally may have stopped short of expectations.

    Fannie 4.0s are currently up 8 ticks at 104-29 and 10yr yields are down 1.6 at 2.686.

    Category: MBS, UPDATE
    Share:   
  • 2/7/14

    Here are the details on the data:

    • Nonfarm Payrolls +113k vs +185k forecast
    • December only revised to 75k from 74k previously
    • November revised to 274k from 241k previously
    • Private payrolls +142k vs 185k forecast
    • Unemployment 6.6 pct, lowest since 10/2008
    • Labor Force Participation rate 63.0 vs 62.8 previously
    • Full Release

    The most damning testimony for the economy isn't so much the 113k payrolls this time, though that does hurt.  Rather, it's the lack of revision to last month's horrible 74k payrolls.  Even on the private payrolls front, last month's 87k print only came up to 89k.

    If there's any saving grace for this data, it's the current private payrolls headline which showed 142k jobs created vs a 185k forecast.  If we're to accept that the weather had as much of an impact as some have suggested, this would actually mean today's report is fairly close to consensus. 

    As such, if we see bond markets make no further progress than their initial jolt into positive territory, this might be why.  In other words, the mere POSSIBILITY that weather can explain away some of the gap means there's a chance this isn't weak enough for us to see any further progress. 

    10's shot down to 2.633 from 2.72 immediately but are up to 2.658 currently.  MBS jumped from 104-18 to 104-31 and are holding there.

    Category: MBS, UPDATE
    Share:   
 
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