With Japanese markets closed, overnight trading activity was light. 10yr Treasuries began the European hours in slightly weaker Territory than Friday's worst levels, but improved into the domestic open. This helped MBS come in the door right in the middle of Friday's range, but bond markets sold-off moderately on a series of Fiscal Cliff headlines. None of the news was meaningful or specific, but markets seem to be giving some consideration to lack of negative headlines. In other words, traders have arrived this morning to see some equivocal-but-not-negative Fiscal Cliff headlines, and for lack of a more elegant way to put it, that's better than nothing. Despite the small dose of weakness, 104-24 has been supportive for Fannie 3.0s for all but a few of the spikier moves. NOTE: bond markets close early today. Make sure you're up to speed on any changes to lock desk times, and keep in mind that politicians may well drop tape bombs tonight and tomorrow that markets won't have a chance to respond to until Wednesday. That means that if some iteration of a Fiscal Cliff deal happens to pass, and if bond markets are going to sell-off as a result, that they will be selling off heavily on Wednesday morning, BEFORE rate sheets come out.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing
is available via MBS Live.
Pricing as of 11:05 AM EST
Morning Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts
and updates issued via email and text alert to MBS Live subscribers
MBS Back To Lows After More Cliff Headlines
Bond markets continue to follow stocks and stocks continue to follow Fiscal Cliff headlines. The most recent headlines from Bloomberg indicate that Senate Majority leader Reid is "hopeful" for a Fiscal Cliff deal today.
10yr yields hit their highs of the morning at 1.7426 and MBS hit their lows with Fannie 3.0s returning to 104-21 before bouncing back to 104-24.
Today will be an important one to "know thy lender," as reprice likelihoods are just as much an exercise is psychoanalysis as they are about observing MBS price movements. Based purely on MBS prices, we're probably not at much risk for the few lenders who are out with rates already, but some lenders switch to a defensive stance and reprice negatively simply on volatility and trends.
Bond Markets Weaker In First Hour, Stock Lever In Play
Stepping back from the more tightly focused 1-2 day time frame and this morning's market movements have been relatively inconsequential, especially given the nearness of the Fiscal Cliff deadline and lack of meaningful progress. But in the context of this morning, stocks spiked following a soundbytes from Rep Van Hollen citing progress in talks between Biden and McConnell, as well as a similar clip from Corker roughly 20 minutes, simply mentioning he expects a deal today.
Treasuries were doing a better job of marching to the beat of their own drummer until then, having moved from 1.73 to 1.694 in the European session. As stocks swung higher, 10yr yields followed, moving back to the same 1.73 overnight. For their part, MBS have taken the news mostly in stride, falling from 104-29 highs just after the open to 104-21 before bouncing back as Treasuries and stocks came off their highs.
There are no significant scheduled data sets today and bond markets will close early at 2pm Eastern. Volume has been better than the days before and after Christmas, but still very low compared to longer term averages. The most striking feature of today's trade thus far has been the faithful, even if slightly delayed, adherence to the stock lever.
To that end, the equities open could be the next informative event with S&P's looking like they favor a bit of weakness in the first few ticks of the cash open. Bond markets continue to follow with 10's moving back down into the mid 1.71's and MBS back up to 104-27, just 1 tick weaker than Friday's close. Naturally, the caveat is in order that these are just the first 2 minutes of domestic stock markets being open, and we'd imagine that a reversal in the slightly negative sentiment so far would prompt a similar reversal in bond markets. Of course the caveat there is that all this is happening on a small scale... Zoom out to a 3 day+ view and none of these swings matter.
Live Chat Featured Comments
Scott Rieke : "DK - any logical attempt to answer that question will be offset by the illogical market"
Ira Selwin : "Worry about it on Wed"
Ira Selwin : "half day, and whoever is working is half checked out"
Ira Selwin : "Personally, I wouldn't worry about the fnma 3 today"
Daniel Kramer : "MG, if there is any kind of deal made today and voted on, even if it is just a BS fix to push this all back a little while, what do you see the FNMA 3.0 doing"
Dan Ramirez : "Freedom Reprice Worse "
Matthew Graham : "Looks like Reid just said he's "hopeful" for a fiscal cliff deal today, according to Bloomberg "
Matthew Graham : "RTRS- KYL DECLINES TO DETAIL FISCAL CLIFF TALKS; NOT SURE TALKS WILL PRODUCE A BILL BY MIDNIGHT DEADLINE "
Matt Hodges : "WF took back .125 from govie pricing on Friday"
Matthew Graham : "RTRS- REPUBLICAN U.S. SENATOR KYL SAYS "A LOT OF PROGRESS" ON FISCAL CLIFF TALKS; DISCUSSIONS ONGOING "
Matthew Graham : "doesn't look like they've made up their mind yet, but it does look like Treasuries are still tuned in to the indecision."
Victor Burek : "so much for futures rallying..stocks open in the red"
Ted Rood : "In related news, all lock desks put out today's pricing 5 minutes ago at 104 20, and promptly went out to bar for the rest of the day."
Jeff Anderson : "Gm, all. Sure that was a recording from the summer of 2011, OO?"
Oliver S. Orlicki : "Senator on cnbc said a deal should happen today"
Matthew Graham : "Last Cliffy wires were almost 20 minutes ago now... Generic "making progress" type stuff. There may be something new, but I don't have a new wire yet. "
Oliver S. Orlicki : "Futures just doubled"