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MBS RECAP: Bond Rout Resumes; Duck and Cover

By: Matthew Graham
Posted Wed, Feb 7 2018, 4:34 PM

In the past or under different circumstances, a day like yesterday might not have been enough for me to write a headline like "nice while it lasted."  But if you watched yesterday's video and read the analysis, you saw the chart showing the percent change comparison between stocks and bond PRICES (can't look at percent change on a yield).  That--along with me flat out saying it--implied we'd need a fresh supply of massive stock market drama in order to sustain further bond market improvement.

We haven't had a fresh supply of stock market drama. 

Instead, stocks have gradually been recovering from Monday's rout, despite some bumps in the road.  As such, it is time for the bond market rout to resume.

This morning was a bit deceptive, with bonds technically starting in positive territory.  But keep in mind that yesterday ended on a high note for yields, so bonds were actually beginning the day on a high pivot point that they were unable to break below (2.775).  It was all selling from there on out--especially after a poorly-received 10yr Treasury auction in the afternoon.  

Bottom line: we're back on the same scary ride we'd been on before Monday's intermission.


MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
FNMA 3.5
100-08 : -0-07
Treasuries
10 YR
2.8359 : +0.0699
Pricing as of 2/7/18 4:33PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
3:38PM  :  ALERT ISSUED: If You Haven't Seen a Reprice Yet...
1:08PM  :  ALERT ISSUED: Weaker Auction No Help to Bonds; Ongoing Reprice Risk
12:55PM  :  ALERT ISSUED: Reprices Getting More Likely Ahead of Auction
11:50AM  :  ALERT ISSUED: Negative Reprice Risk Increasing Slightly
9:55AM  :  Still Holding Modest Gains, But Not Storming The Castle

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Dave Christensen  :  "Just had a chance to read The Day Ahead. Love the horse racing metaphors. Exceptional imagery and writing skills MG! One of your best ever!"
Matthew Graham  :  "I love how higher yields following the 1pm auction are getting credit for causing stock selling that began at 10:45am. And just never mind about stocks and bond yields moving in the same direction so much over the past 3 days."
Victor Burek  :  "last time at these levels, stocks didnt like it"
Matthew Graham  :  "reasonable stats but for a higher yield than expected"
Matthew Graham  :  "C"
Matthew Graham  :  "RTRS - U.S. SELLS $24 BLN 10-YEAR NOTES AT HIGH YIELD 2.811 PCT, AWARDS 5.76 PCT OF BIDS AT HIGH"
Matthew Graham  :  "RTRS - FED'S EVANS SAYS RISKS SEEM TO BE MOVING TOWARD TO THE LIKELIHOOD OF MORE INFLATION"
Matthew Graham  :  "CH, definitely a good bet any time a 10yr auction is approaching"
Doug Seder  :  "I heard they were forcing the MI companies to change their guidelines, hence the 45 DTI cap, sub 700, FNMA will go to 50, but with less than 20%, the MI companies will not."
Clayton Sandy  :  "just tightening up on what they approve. Not sure they're shutting it off. Almost all MI companies are requiring a 700 for 45%+ now as of next month"
Matt Hodges  :  "Dan Draitser: 2/2/18 1:04PM Heard they are tightening back up on the 45%+ files with the new DU release"
Chris Hooker  :  "Hey MG, can we assume the weakness in the past hour is a pre-cursor to a weak 10 year auction since they are having to raise prices to attract bids or is this normal?"
Steven Klodzin  :  "Is anyone hearing rumblings of Fannie going back to 45% DTI cap with the 10.2 release?"

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