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Quite a lot of "sparkle and fade" regarding the HARP 2.0 pre-announcement this morning. Or is it a pre-pre-announcement? Either way, the finer points won't be out until November 15th, but it seems like the amount of information that made it out this morning was more than markets were expecting. Thus the extent to which the program was "priced into the market" seemed briefly in question based on how MBS were traded this morning--namely: MUCH WEAKER VS BENCHMARKS! Either it was a calculated fade (an...

Just like bond markets were struggling after Bernanke's testimony yesterday, but not directly because of the testimony, so too are they struggling today after ISM data. It's not that the data was especially great and is directly causing bonds to suffer. Rather, we're dealing with the twofold factor of Stock Market strength combined with normal ebbs and flows of an uncertain market. You'll hear me reference "ebbs and flows" more often these days, and really, it's just another way of saying "the trend...

In yesterday's commentary, we noted that the stock lever has been well-connected and that the same could be true of today. As you'll see in the chart below, it is. You'll also see the biggest volume spike of the day at 3pm (those are 10yr futures contracts for the record). That's not because some major economic event or headline came across the wires, but rather because 3pm is day/week/month and quarter-end for bond markets. Who knows what positioning intentions lurk in the hearts of traders leading...

A few charts for the afternoon... First, we'll take a look at a short term chart of 10yr note yields vs the S&P index. It's fairly common that we see vary degrees of connection between 10yr yields and stock prices. This morning provided a good opportunity to observe a potential technical support level around 1.90 in 10yr yields. Stocks and bonds had been tracking fairly well, but as you can see in the chart below, as the day progressed, 10's continued to hold fairly sideways even though stocks...

Volatile couple of days for MBS... After a moderate day of losses yesterday, MBS were down again this morning, and with limited impact expected from economic data, and the sense that we'd be relatively guidance-free until next week's FOMC, we viewed MBS as being indirectly at the mercy of the stock market today. Why indirectly? Because Treasuries are the primary beneficiary of stock selling when the "stock lever" is in effect. Case in point, Treasuries are in the green right now while MBS are still...

Stocks, Bonds, MBS, all correlate by varying amounts. As the level of uncertainty has drastically increased in markets, we've seen a lot more connectivity between stock prices and bond yields. Beyond that, we almost always see a high level of correlation between bond PRICES and MBS PRICES. The following charts show how some of those correlations have been playing out recently. The theme is that things tend to move in the same direction for Treasuries and MBS. Fixed income YIELDS tend to move in the...

Stocks and bonds traded in a volatile manner last week as cash continued to seek out a liquid marketplace. Risk aversion remains the favored strategic bias. Fundamentally there are a confluence of issues at hand, including but not limited to: global deflation, sovereign debt defaults, ballooning budget deficits, a seemingly inescapable reliance on government support, financial reform, domestic and foreign elections, and a recalibration of economic growth expectations. Whatever ax you choose to grind, numbers speak louder than words and a major shift in currency and commodity valuations has moderated demand for risk and forced cash into safe haven assets like government guaranteed U.S. Treasury debt. The result for mortgage professionals: Near Record Low Mortgage Rates...