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You are viewing Micro News from Thursday, Jun 26, 2014 - View all recent Micro News
  • 6/26/14
    Further Weakness Averted After Earlier Selling; MBS Back Near Highs

    The most recent alert classified itself as "an early warning that reprice risk could show up if prices don't bounce here."  At this point it's safe to say prices bounced.

    Not only that, but Treasury yields bounced righ in line with the morning's initial low yields, making for a nice little "pivot" off 2.537 (currently back down to 2.527).

    Fannie 3.5s are back up to 102-25 after bouncing several times around 102-22.  This is 7 ticks up on the day and the stability could allow for some positive reprices from lenders who are into that sort of thing. 

    Category: MBS, UPDATE
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  • 6/26/14
    This is an early warning that reprice risk could show...
    MBS Updates are a service provided to MBS Live! subscribers only.
    Learn More | Start a Free Trial | View MBS Prices
    Category: MBS, alert
    Share:   
  • 6/26/14
    Bond Markets at Better Levels on Stock Swoon, Fed-Speak, Europe Sympathy

    Prices briefly approached levels consistent with positive reprices, but have pulled back just slightly in the past few minutes.  MBS were up another 4 ticks from morning rate sheet print times, but that gain has been pared to only 2 ticks now.  Fannie 3.5s are up 6 ticks in total on the day at 102-26 and 10yr yields are down 3.2bps to 2.527. 

    Several sources to consider:

    • S&P dropped a quick 10 points in the first 20 minutes of trade.  The bounce at 9:50am coincides with Treasury yields hitting their lows so this "stock lever" hypothesis is as good as any.
    • Fed's Bullard and Lacker have both been speaking during the rally.  There are no glaringly obvious market movers among their sound bytes, but Bullard did say he believes long run growth potential is in the "low 2's" and also that he would push back his forecast for a Q2 rate hike if data disappointed
    • Europe...  European bond markets continue to rally to the best levels of the year.  That's always worth at least some sympathy bid from Treasuries.

    At 2.527, 10yr yields are trading below the 2.529 resistance level set yesterday.  That's as strong a showing as could be hoped for before this afternoon's 7yr Auction.  That said, trading levels after the auction will be more relevant to the outlook (i.e. we could forgive some volatility between now and then as mere pre-auction hesitation).  For now, things are good--almost good enough for positive reprices.

    Category: MBS, UPDATE
    Share:   
  • 6/26/14
    Bond Markets Slightly Stronger After Weak Consumer Spending Data

    We can skip right to the domestic session and right to the economic data this morning as bond markets were completely unchanged by 8:30am (though it may be worth noting that Treasury yields look like they might have gone higher had it not been for strength in German debt which is currently at 2014's low yields). 

    2 reports this morning: Jobless Claims and Incomes/Outlays (which is basically "consumer spending"). Claims isn't very interesting.  It came in close to consensus and had no major revisions (312k vs 310k forecast and continued claims 2.571 vs 2.570 mln forecast).

    The biggest obvious positive factor for bonds is the miss in consumer spending (personal consumption expenditures, officially).  Here's the run-down:

    • May Spending +0.2 vs +0.4 forecast.  April revised to 0.0 from -0.1
    • Income +0.4 vs +0.4 forecast
    • Core PCE price index +0.2 vs +0.2 forecast
    • Inflation-adjusted spending -0.1 vs -0.2 previously

    In addition to the economic data, Richmond Fed Pres Lacker was out with a prepared speech at 8:30 with an uncharacteristically dovish (read: bond-friendly) remark on labor markets potentially having recovered less than employment rate indicates.  While this is a "no duh" statement for the average working-class citizen, it's not the kind of thing that Lacker and other hawkish Fed presidents are known for saying. 

    This probably isn't a major consideration for markets this morning, but it's an interesting evolution in his tone nonetheless. The more we see relatively hawkish Fed presidents saying stuff like this, the more we can take the relatively dovish Fed members at their word regarding the commitment to accommodative policy.

    10yr yields fell most of the way to yesterday's lows, but are evaluating a bounce at the moment.  MBS basically hit yesterday's highs (there were a few moments of higher prices right after GDP yesterday, but only by 1 tick).  Fannie 3.5s are currently up 4 ticks on the day at 102-22.

    Category: MBS, UPDATE
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  • 6/26/14

    The most recent alert classified itself as "an early warning that reprice risk could show up if prices don't bounce here."  At this point it's safe to say prices bounced.

    Not only that, but Treasury yields bounced righ in line with the morning's initial low yields, making for a nice little "pivot" off 2.537 (currently back down to 2.527).

    Fannie 3.5s are back up to 102-25 after bouncing several times around 102-22.  This is 7 ticks up on the day and the stability could allow for some positive reprices from lenders who are into that sort of thing. 

    Category: MBS, UPDATE
    Share:   
  • 6/26/14
    This is an early warning that reprice risk could show...
    MBS Updates are a service provided to MBS Live! subscribers only.
    Learn More | Start a Free Trial | View MBS Prices
    Category: MBS, alert
    Share:   
  • 6/26/14

    Prices briefly approached levels consistent with positive reprices, but have pulled back just slightly in the past few minutes.  MBS were up another 4 ticks from morning rate sheet print times, but that gain has been pared to only 2 ticks now.  Fannie 3.5s are up 6 ticks in total on the day at 102-26 and 10yr yields are down 3.2bps to 2.527. 

    Several sources to consider:

    • S&P dropped a quick 10 points in the first 20 minutes of trade.  The bounce at 9:50am coincides with Treasury yields hitting their lows so this "stock lever" hypothesis is as good as any.
    • Fed's Bullard and Lacker have both been speaking during the rally.  There are no glaringly obvious market movers among their sound bytes, but Bullard did say he believes long run growth potential is in the "low 2's" and also that he would push back his forecast for a Q2 rate hike if data disappointed
    • Europe...  European bond markets continue to rally to the best levels of the year.  That's always worth at least some sympathy bid from Treasuries.

    At 2.527, 10yr yields are trading below the 2.529 resistance level set yesterday.  That's as strong a showing as could be hoped for before this afternoon's 7yr Auction.  That said, trading levels after the auction will be more relevant to the outlook (i.e. we could forgive some volatility between now and then as mere pre-auction hesitation).  For now, things are good--almost good enough for positive reprices.

    Category: MBS, UPDATE
    Share:   
  • 6/26/14

    We can skip right to the domestic session and right to the economic data this morning as bond markets were completely unchanged by 8:30am (though it may be worth noting that Treasury yields look like they might have gone higher had it not been for strength in German debt which is currently at 2014's low yields). 

    2 reports this morning: Jobless Claims and Incomes/Outlays (which is basically "consumer spending"). Claims isn't very interesting.  It came in close to consensus and had no major revisions (312k vs 310k forecast and continued claims 2.571 vs 2.570 mln forecast).

    The biggest obvious positive factor for bonds is the miss in consumer spending (personal consumption expenditures, officially).  Here's the run-down:

    • May Spending +0.2 vs +0.4 forecast.  April revised to 0.0 from -0.1
    • Income +0.4 vs +0.4 forecast
    • Core PCE price index +0.2 vs +0.2 forecast
    • Inflation-adjusted spending -0.1 vs -0.2 previously

    In addition to the economic data, Richmond Fed Pres Lacker was out with a prepared speech at 8:30 with an uncharacteristically dovish (read: bond-friendly) remark on labor markets potentially having recovered less than employment rate indicates.  While this is a "no duh" statement for the average working-class citizen, it's not the kind of thing that Lacker and other hawkish Fed presidents are known for saying. 

    This probably isn't a major consideration for markets this morning, but it's an interesting evolution in his tone nonetheless. The more we see relatively hawkish Fed presidents saying stuff like this, the more we can take the relatively dovish Fed members at their word regarding the commitment to accommodative policy.

    10yr yields fell most of the way to yesterday's lows, but are evaluating a bounce at the moment.  MBS basically hit yesterday's highs (there were a few moments of higher prices right after GDP yesterday, but only by 1 tick).  Fannie 3.5s are currently up 4 ticks on the day at 102-22.

    Category: MBS, UPDATE
    Share:   
 
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