In one short day, domestic bond markets have gone from threatening to bounce higher in yield to confirming just how committed they are to the "low and sideways" theme. If today's trading action had been weaker, the recent trend would have looked very much like a "U-shaped" dip, but an overnight flight-to-safety in Europe put an end to that, keeping 10yr yields locked under a ceiling around the 1.52% level. MBS are thrilled with the ground-holding as it gives ongoing confirmation that 3.0's are the place to be. 3.0's additionally benefit from the general 'duration-grab.' In other words, the yield curve is flattening. 2's are the least improved, 30's the most. Duration is in demand today and Fannie 3.0's offer more duration than 3.5's, hence the 9 tick improvement on the day to 103-30.
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Bond Markets Stronger Overnight And Holding Gains On Euro Headlines
European benchmark debt with well-bid from the start of the European session, with 10yr German Bund yields already pushing all time lows before any news really hit. Markets were then generally assumed to be waiting on the outcome of the Spain bailout talks earlier this morning. In the meantime, supporting headlines and trading helped build a case for rallying further into the Spain news. For instance, the CSU party in Germany, although only holding 44/620 seats in Germany's legislative Bundestag arm, reminded markets that Europe is indeed "not fixed" in threatening to reject any Greek efforts to renegotiate its bailout and going a step further to say they supported a Greek exit.
But such soap-opera-ish headlines were minor players to the simple tradeflow developments overnight as peripheral debt spreads widened to core EU debt. German Bunds pushed further into new all-time lows which, as we've discussed, is going to create spillover buying for US debt. Indeed that has been the case as 10yr yields have traded between 1.48 and 1.46 so far this morning, and MBS push into new all time highs with Fannie 3.0's comically close to the "never-thought we'd see it" 104-00.
Earlier this morning, when Spain's bank bailout was finally approved with the condition that Spain would retain full responsibility, Bunds rallied further (down to 1.16) in fact, leading domestic 10's to their lowest yields of the morning's range. All things European have clearly stepped up to trump anything from the domestic earning's calendar as stocks have merely followed bonds (which in turn merely follow Bunds...).
The rest of the day's calendar is empty, so the afternoon becomes about whether or not we can hold the early EU-inspired gains after the EU session ends.
Live Chat Featured Comments
Matthew Graham : "RTRS- EGAN-JONES CUTS SPAIN SOVEREIGN RATING TO CC-PLUS FROM CCC-PLUS"
Daniel Kramer : "they know they are out of comlaince of making a credit decision wihin 30 days, but they said they cant get ahead"
Daniel Kramer : "jeez, Fifth Third is underwriting refi loans that were received on May 29th"
Ray J : "i wonder what the law says about it?"
Ray J : "big bank...little client...financial harm...hmmm...sounds liek some baaaaddd publicity at the least and triple damages + potential"
Ray J : "hmmm. Would that harm your client? they refusing to do it?"
Matt Hodges : "my client has talked to 15 people at BigBank over the last 2 days. I just talked to a retail LO, who said "that's typical here over the last six months.""
Matt Hodges : "any suggestions for forcing a BigBank to record a modification to a HELOC? BigBank refuses, stating it's not a new loan, so we don't have to. I must have it recorded in order to accomplish auto-subordination in VA"
Dan Clifton : "yes, i did one with a 2nd and a 3rd"
Daniel Kramer : "has anyone tried to subordinate a 2nd and 3rd line of credit behind a new 1st loan? the LTV wil be 65% and the CLTV with all three would still only be 88%. "
Ira Selwin : "Wells now has rates below 3.25 on their rate sheet by the way"
Mike Drews : "wow..wells is worse out of the gate again."
John McClellan : "104 on the 3.0? can we do it!"
Matthew Graham : "EU 10's at 1.17%"
Matthew Graham : "RTRS - EURO EXTENDS LOSSES VS DOLLAR, HITS SESSION LOW AFTER ECB SAYS GREEK BONDS NOT ELEGIBLE AS COLLATERAL FROM JULY 25 "
Jeff Anderson : "GM, all. I can't believe there are still jitters about Europe. They'd solved the problem multiple times, right?"
Matthew Graham : "RTRS - ECB SAYS GREEK GOVT BONDS TO BE INELIGIBLE AS COLLATERAL FROM JULY 25 "
Matthew Graham : "RTRS - ECB SAYS WILL ASSESS POTENTIAL GREEK BOND ELIGIBILITY AS COLLATERAL FOLLOWING CONCLUSION OF TROIKA "
Victor Burek : "so the house will sit and sit and get in worse conditional until someone can pay cash"
Victor Burek : "with that much down, condition shouldnt matter"
Jill Statz : "will the bank allow for the home to be repaired prior to closing to get into C3 or better condition?"
Victor Burek : "so a loan dies that someone was gonna put down 50% because a appraiser said fair instead of average"
Matt Hodges : "putting 50% down - that's the kicker"
Jill Statz : "then you are probably stuck with the "fair" C4...how much will it cost to repair? Can you do a FHA 203k on it?"
Matt Hodges : "lots of issues that the Realtor told me were "cosmetic""
Victor Burek : "not sure but i have had a couple loans die becuase of it"
Matt Hodges : "i've never run across this, so i don't know if it's f/f standard"
Victor Burek : "my bank would deny"
Matt Hodges : "general question: none of my investors will take conventional "fair" condition - only "average" or better. Will investors accept this and are my lenders overly cautious?"