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You are viewing Micro News from Thursday, Jul 17, 2014 - View all recent Micro News
  • 7/17/14
    Israel Ground Offensive in Gaza Sends Bond Yields Lower Still

    At 3:11pm, Al-Jazeera reported the Israeli Army launched a large-scale ground, air, and sea offensive on the Gaza Strip.  It took bond markets several minutes to figure out what was going on (stocks even longer), but as the story came into clearer focus, both sides of the market took off (stocks and bond yields lower).  Israel's Prime Minister released an official statement confirming the ground offensive. 

    The rally carried 10yr yields through the important 2.47% level.  Although Treasuries technically mark the end of their trading day at 3pm, this is one of those cases where we  could justifiably wonder if the market activity wouldn't have been the same if the headline came out before 3pm.  In other words, 10yr yields officially closed above 2.47, but the move into the 2.45-2.46's isn't inconsequential.

    MBS have done their best to keep pace with the Treasury rally, but as is always the case with geopolitical risk rallies, Treasuries outperform.  Still, MBS are up 12 ticks on the day now at 102-15.  Positive reprices are incrementally more possible than they were at the last update. 

    The one glaring caveat for all this is that as soon as there's a turning point in geopolitical risk, the turning point in bond markets can be swift.

    Category: MBS, UPDATE
    Share:   
  • 7/17/14
    Ongoing Positive Reprice Potential as Treasuries/MBS Hold Gains

    Sharp, mid-day rallies based on surprise headlines can't ever be assumed to have staying power, but today's is holding up nicely.  10yr yields are currently close to an important technical level at 2.47, and have traded as low as 2.4674 this afternoon.  Fannie 3.5s are up 9 ticks to 102-12.

    Just after noon, both sides of the bond market looked like they might have rallied as much as they were going to rally for the day.  MBS especially, pulled back a quick 4-5 ticks from the highs.  But that was the extent of the afternoon drama as they've gradually moved back to previous highs.

    A few lenders have already repriced positively, and it remains a possibility for other lenders as long as we're at or near current prices.

    Category: MBS, UPDATE
    Share:   
  • 7/17/14
    Strong Philly Fed Data Reinforces Bounce Toward Weaker Levels

    Bond markets were already in the process of pulling back from their best levels of the day with consecutive bounces at 8:50 and 9:27am in Treasuries (around 2.495%).  MBS prices were also making the same turn toward weaker levels.

    The just-released Philly Fed Index offered further support for the bounce, though it hasn't made for a runaway sell-off just yet.  10yr yields are up to 2.51 (still 3bps lower on the day), and Fannie 3.5s are down to 102-07, still 4 ticks higher on the day. 

    Here's a run-down of the data:

    • Philly Fed business conditions 23.9 vs 16.0 forecast
    • New Orders 34.2 vs 16.8 previously
    • Employment Index 12.2 vs 11.9
    • Business Conditions highest since March 2011

    The bond market response may well pick up steam in the coming moments, but for now, there's no reprice risk implication.

    Category: MBS, UPDATE
    Share:   
  • 7/17/14
    Bond Markets Stronger Overnight, and Another Boost From Weak Housing Data

    Weak housing data is bittersweet for originators.   On the one hand, it speaks to ongoing stagnation in the demand for our services.  On the other hand, it's helps rates move lower.  Here's a run-down of the weak data in question:

    • June Housing Starts 893k vs 1018k forecast
    • Starts lowest since Sept 2013
    • May revised down to 985k from 1001k
    • Permits 963k vs 1040k forecast.
    • Permits lowest since Jan 2014

    This was in stark contrast to the stronger-than-expected Jobless Claims data

    • Claims 302k vs 310k forecast, 305k previously
    • Continued Claims 2.507mln vs 2.575mln forecast, 2.586mln previously

    Given that this is "survey week" Claims data (covering the same time period as the next NFP release), markets are giving a good amount of weight to the weaker housing data.  Either that or they data isn't the primary consideration and is simply being used as cover for traders' positional goals.  Reality is usually somewhere in between these days.

    Whatever the case, we are in the middle of a nice 2-day reversal from what looked like a broader move higher in yield.  The caveat is that it's more "nice" for Treasuries, which are up 12 ticks in price (down 4bps in yield to 2.496) while MBS are only up 6 ticks to 102-09.

    About half of the strength was already intact coming off the overnight session, with the other half showing up after the 8:30am data.  10am brings the only other important data of the morning with Philly Fed.

    Category: MBS, UPDATE
    Share:   
 
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  • 7/17/14

    At 3:11pm, Al-Jazeera reported the Israeli Army launched a large-scale ground, air, and sea offensive on the Gaza Strip.  It took bond markets several minutes to figure out what was going on (stocks even longer), but as the story came into clearer focus, both sides of the market took off (stocks and bond yields lower).  Israel's Prime Minister released an official statement confirming the ground offensive. 

    The rally carried 10yr yields through the important 2.47% level.  Although Treasuries technically mark the end of their trading day at 3pm, this is one of those cases where we  could justifiably wonder if the market activity wouldn't have been the same if the headline came out before 3pm.  In other words, 10yr yields officially closed above 2.47, but the move into the 2.45-2.46's isn't inconsequential.

    MBS have done their best to keep pace with the Treasury rally, but as is always the case with geopolitical risk rallies, Treasuries outperform.  Still, MBS are up 12 ticks on the day now at 102-15.  Positive reprices are incrementally more possible than they were at the last update. 

    The one glaring caveat for all this is that as soon as there's a turning point in geopolitical risk, the turning point in bond markets can be swift.

    Category: MBS, UPDATE
    Share:   
  • 7/17/14

    Sharp, mid-day rallies based on surprise headlines can't ever be assumed to have staying power, but today's is holding up nicely.  10yr yields are currently close to an important technical level at 2.47, and have traded as low as 2.4674 this afternoon.  Fannie 3.5s are up 9 ticks to 102-12.

    Just after noon, both sides of the bond market looked like they might have rallied as much as they were going to rally for the day.  MBS especially, pulled back a quick 4-5 ticks from the highs.  But that was the extent of the afternoon drama as they've gradually moved back to previous highs.

    A few lenders have already repriced positively, and it remains a possibility for other lenders as long as we're at or near current prices.

    Category: MBS, UPDATE
    Share:   
  • 7/17/14

    Bond markets were already in the process of pulling back from their best levels of the day with consecutive bounces at 8:50 and 9:27am in Treasuries (around 2.495%).  MBS prices were also making the same turn toward weaker levels.

    The just-released Philly Fed Index offered further support for the bounce, though it hasn't made for a runaway sell-off just yet.  10yr yields are up to 2.51 (still 3bps lower on the day), and Fannie 3.5s are down to 102-07, still 4 ticks higher on the day. 

    Here's a run-down of the data:

    • Philly Fed business conditions 23.9 vs 16.0 forecast
    • New Orders 34.2 vs 16.8 previously
    • Employment Index 12.2 vs 11.9
    • Business Conditions highest since March 2011

    The bond market response may well pick up steam in the coming moments, but for now, there's no reprice risk implication.

    Category: MBS, UPDATE
    Share:   
  • 7/17/14

    Weak housing data is bittersweet for originators.   On the one hand, it speaks to ongoing stagnation in the demand for our services.  On the other hand, it's helps rates move lower.  Here's a run-down of the weak data in question:

    • June Housing Starts 893k vs 1018k forecast
    • Starts lowest since Sept 2013
    • May revised down to 985k from 1001k
    • Permits 963k vs 1040k forecast.
    • Permits lowest since Jan 2014

    This was in stark contrast to the stronger-than-expected Jobless Claims data

    • Claims 302k vs 310k forecast, 305k previously
    • Continued Claims 2.507mln vs 2.575mln forecast, 2.586mln previously

    Given that this is "survey week" Claims data (covering the same time period as the next NFP release), markets are giving a good amount of weight to the weaker housing data.  Either that or they data isn't the primary consideration and is simply being used as cover for traders' positional goals.  Reality is usually somewhere in between these days.

    Whatever the case, we are in the middle of a nice 2-day reversal from what looked like a broader move higher in yield.  The caveat is that it's more "nice" for Treasuries, which are up 12 ticks in price (down 4bps in yield to 2.496) while MBS are only up 6 ticks to 102-09.

    About half of the strength was already intact coming off the overnight session, with the other half showing up after the 8:30am data.  10am brings the only other important data of the morning with Philly Fed.

    Category: MBS, UPDATE
    Share:   
 
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