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You are viewing Micro News from Thursday, Apr 3, 2014 - View all recent Micro News
  • 4/3/14
    Cautious, Contained Positivity Part 2: Now With Reprices!

    There's not a lot of "updating" or commentary to be done when bond markets are behaving as expected.  With that in mind, markets continue to trade as expected following this morning's initial move.

    Also to be expected is a general lack of big moves the day before NFP.  Essentially, our best chance for a big move would have been a crazy ECB Announcement this morning, followed by crazy strong economic data, subsequently causing snowball selling in Treasuries and major spillover into MBS. 

    Without that "stuff" in play, there's not much left to do apart from simply meandering noncommittally back into the previous range and waiting for NFP.  If you remember the fireworks analogy from a few days back, our heads were turned to see what the kids were lighting off this morning, but it wasn't impressive enough to get us to move our chairs before the big show.

    On a positive note, the mild, but consistent strength has finally delivered the reprices that became possible with this morning's initial gains.  They haven't come in droves, but remain possible while current levels continue to hold.

    If bond markets are going to do anything else significant, they have just under half an hour before the official pit close at the CME (when most traders record end of day Treasury marks despite another 2 hours of domestic trading). Anything in that 3-5pm window is generally less consequential as far as commenting on momentum heading into the next day.

    Category: MBS, UPDATE
    Share:   
  • 4/3/14
    Bond Markets Improving Now, Helped by Data and Europe

    Throughout the morning, domestic bond markets haven't been overly concerned with European markets as the latter tend to be more volatile in response to ECB Rate Announcements.  Still, some influence can be seen between core EU debt (best benchmarked by German 10yr 'Bunds') and US Treasuries.  Bunds are currently helping drag Treasuries toward lower yields with the recent ISM data only helping.

    2014-4-3 tsy bund

    MBS are up to their best levels of the day, gaining twice as much now (4 ticks vs 2 earlier) to 103-24 in Fannie 4.0.  Early lenders could consider positive reprices if current levels hold or are improved upon.

    Category: MBS, UPDATE
    Share:   
  • 4/3/14
    First Move is Slightly Stronger after ISM Data

    Today's most important piece of economic data--ISM Non-Manufacturing--is out with slightly weaker than expected results. 

    • Headline component PMI at 53.1 vs 53.5 forecast, 51.6 previously
    • Business Activity 53.4 vs 55.2 forecast
    • New Orders 53.4 vs 51.3 previously
    • Employment 53.6 vs 47.5 previously

    If anything is holding the data back from having more of a positive impact, it's the notable uptick in the employment sub-component.  Even so, with Business Activity coming in at the lowest levels since June 2013, it's helped bond markets hold their ground at the very least, suggesting the longer-term range can continue to hold into tomorrow's NFP data.

    The day is still a bit young to count on that being the case, but the first reaction is positive in any event.  Fannie 4.0s are up 2 ticks on the day at 103-22 and 10yr yields are down 1bp at 2.7935.  Both are still inside TODAY'S trading range, though they're very close to the stronger side.

    Category: MBS, UPDATE
    Share:   
  • 4/3/14
    Bond Markets Unchanged Overnight, Hit Snooze Button After 1st Round of Data

    Very little to report so far, despite the presence of events that are typically capable of at least SOME market movement on Thursday mornings.

    The ECB left rates unchanged and Mario Draghi hasn't said anything meaningful in his press conference yet.  It's ongoing though, and there's still a chance to see some reaction though it would be mainly limited to European bond markets.  Indeed German Bunds are under a bit of pressure at the moment, and it's a slight drag on US Treasuries, but we're talking about maybe 0.1% impact.

    The 8:30am data was uneventful, with Jobless Claims coming in at 326k vs 317k forecast.  Had it come in at or below consensus, it could have made for more selling pressure.  The International Trade report was out at the same time, showing a current account deficit of 42.3 bln vs a 38.5 bln forecast.  Realistically, no one cares about that report any more.

    Fannie 4.0s are up 1 tick on the day after opening 2 ticks stronger.  All the movement has taken place within a narrow 3 tick range.  Treasuries are similarly sleepy with 10's holding between 2.7915 and 2.805.

    The order of the day is to wait for alarm to go off again at 10am, with ISM Non-Manufacturing data as the last big potential market mover before tomorrow's NFP. 

    Category: MBS, UPDATE
    Share:   
 
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  • 4/3/14

    There's not a lot of "updating" or commentary to be done when bond markets are behaving as expected.  With that in mind, markets continue to trade as expected following this morning's initial move.

    Also to be expected is a general lack of big moves the day before NFP.  Essentially, our best chance for a big move would have been a crazy ECB Announcement this morning, followed by crazy strong economic data, subsequently causing snowball selling in Treasuries and major spillover into MBS. 

    Without that "stuff" in play, there's not much left to do apart from simply meandering noncommittally back into the previous range and waiting for NFP.  If you remember the fireworks analogy from a few days back, our heads were turned to see what the kids were lighting off this morning, but it wasn't impressive enough to get us to move our chairs before the big show.

    On a positive note, the mild, but consistent strength has finally delivered the reprices that became possible with this morning's initial gains.  They haven't come in droves, but remain possible while current levels continue to hold.

    If bond markets are going to do anything else significant, they have just under half an hour before the official pit close at the CME (when most traders record end of day Treasury marks despite another 2 hours of domestic trading). Anything in that 3-5pm window is generally less consequential as far as commenting on momentum heading into the next day.

    Category: MBS, UPDATE
    Share:   
  • 4/3/14

    Throughout the morning, domestic bond markets haven't been overly concerned with European markets as the latter tend to be more volatile in response to ECB Rate Announcements.  Still, some influence can be seen between core EU debt (best benchmarked by German 10yr 'Bunds') and US Treasuries.  Bunds are currently helping drag Treasuries toward lower yields with the recent ISM data only helping.

    2014-4-3 tsy bund

    MBS are up to their best levels of the day, gaining twice as much now (4 ticks vs 2 earlier) to 103-24 in Fannie 4.0.  Early lenders could consider positive reprices if current levels hold or are improved upon.

    Category: MBS, UPDATE
    Share:   
  • 4/3/14

    Today's most important piece of economic data--ISM Non-Manufacturing--is out with slightly weaker than expected results. 

    • Headline component PMI at 53.1 vs 53.5 forecast, 51.6 previously
    • Business Activity 53.4 vs 55.2 forecast
    • New Orders 53.4 vs 51.3 previously
    • Employment 53.6 vs 47.5 previously

    If anything is holding the data back from having more of a positive impact, it's the notable uptick in the employment sub-component.  Even so, with Business Activity coming in at the lowest levels since June 2013, it's helped bond markets hold their ground at the very least, suggesting the longer-term range can continue to hold into tomorrow's NFP data.

    The day is still a bit young to count on that being the case, but the first reaction is positive in any event.  Fannie 4.0s are up 2 ticks on the day at 103-22 and 10yr yields are down 1bp at 2.7935.  Both are still inside TODAY'S trading range, though they're very close to the stronger side.

    Category: MBS, UPDATE
    Share:   
  • 4/3/14

    Very little to report so far, despite the presence of events that are typically capable of at least SOME market movement on Thursday mornings.

    The ECB left rates unchanged and Mario Draghi hasn't said anything meaningful in his press conference yet.  It's ongoing though, and there's still a chance to see some reaction though it would be mainly limited to European bond markets.  Indeed German Bunds are under a bit of pressure at the moment, and it's a slight drag on US Treasuries, but we're talking about maybe 0.1% impact.

    The 8:30am data was uneventful, with Jobless Claims coming in at 326k vs 317k forecast.  Had it come in at or below consensus, it could have made for more selling pressure.  The International Trade report was out at the same time, showing a current account deficit of 42.3 bln vs a 38.5 bln forecast.  Realistically, no one cares about that report any more.

    Fannie 4.0s are up 1 tick on the day after opening 2 ticks stronger.  All the movement has taken place within a narrow 3 tick range.  Treasuries are similarly sleepy with 10's holding between 2.7915 and 2.805.

    The order of the day is to wait for alarm to go off again at 10am, with ISM Non-Manufacturing data as the last big potential market mover before tomorrow's NFP. 

    Category: MBS, UPDATE
    Share:   
 
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