Unlike the well-forecast storm in the northeast, movements in bond markets this morning were less well-telegraphed. That said, this morning's pre market post (read it HERE), did a fairly good job of calling out the two key themes of the day: more room for weakness than positivity in Treasuries and extra volatility potential for MBS. In fact the 1.953% resistance level we mentioned actually turned out to mark the 3pm close in 10yr Treasuries. The path to get there was admittedly more circuitous than we might have imagined, however, with bond markets starting out the day well into the green only to sell off early and claw their way back by the end of the day.
The initial sell-off was VERY much a 9:30am sort of thing, suggesting heavy connection to asset allocation trading between stocks and bonds. Rate-Lock selling also weighed on Treasuries (corporate bonds are priced on spread to Treasuries and issuers are effectively shorting Treasuries via rate-lock-agreements when corporate bond pricing is announced). Combined with tenuous motivations for low yields in the morning (mostly short covering), things moved from green to red in brutally short order.
Whereas there were negatively compounding events affecting the whole bond market, there was an additional layer or two of MBS-specific negativity that took an even nastier toll on mortgage markets vs Treasuries. It was actually the combination of two layers: The roll and light liquidity that made a mess of MBS markets this morning. That messiness was apparent in most lender's first rate sheets of the day, but things got more and more sorted out as the day progressed. Some lenders repriced positively and MBS still have a fighting chance to hold over 103-00 support after the roll.
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 4:04 PM EST
Afternoon Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts
and updates issued via email and text alert to MBS Live subscribers
Continuing To Ratchet Higher. Positive Reprice Potential
It's been a long slog back for MBS and there's been less room for soon to be settled February MBS prices to move, but March is getting up to pre-sell-off levels from earlier this morning. February is close with Fannie 3.0s only 3 ticks lower at 103-08. Positive reprice potential is slightly better at current levels, though some lenders are more conservative than average on Friday afternoon. We just got one reprice, however, and we could see a few more before the end of the day.
Treasuries and MBS Put up a Good Fight
After breaking support at 1.953, benchmark 10yr yields quickly rose to 1.99 taking fannie 3.0’s to a low of 103-01 causing a few lenders to reprice worse. Since, yields have fought back bringing the 10yr to 1.96 and the fannie 3.0 up to 103-08. Positive reprices are not a given but possible.
Live Chat Featured Comments
Jason Anker : "http://portal.hud.gov/hudportal/documents/huddoc?id=npma33.pdf"
Mario Ingraffia : "Jason, do you know what it called or where I can find it?"
Jason Anker : "Yes"
Mario Ingraffia : "VA gurus, is there a specific form that needs to be completed regarding the termite/pest inspection?"
Nate Miller : "REPRICE: 2:14 PM - Caliber Funding Better"
Rob Clark : "second reprice. All fixed this time."
Rob Clark : "REPRICE: 1:07 PM - Provident Funding Better"
Ted Rood : "If you have some time to watch, more likely to improve than worsen FOR THE MOMENT."
Clayton Sandy : "REPRICE: 12:04 PM - Provident Funding Better"
Scott Davis : "beauty of the bungee....what goes down must come up....(please and thiank you)"
Scott Davis : "ugh...just got in. Nothing like seeing mbs bungee jumping on a friday..."
Ted Rood : "Works for me. Doesn't say much about outlook for equities if investors start buying treasuries paying 1.25% though."
Brent Borcherding : "http://www.cnbc.com/id/100446233"
John Tassios : "so far you can't beat Schilling's record / out of all bond commentaors / economists, he has the best track record of calling yields / still saying bonds have a good run left to downside in yields"
Victor Burek : "the other day, i heard a interview he was giving and he said he thought yields have just about toppped out"
John Tassios : "Schilling still calling for 10 Year down to near 1% - 1.25% / 30 year down to close to 2% / He said Gross and other big bond predictors have been wrong on Bonds the past 5 years and have been saying for 5 years that rates going up"
John Tassios : "Schilling just commented on Bond market / he said we are still going through deleveraging and there is still risk of deflation / that is why FED did QE3 /"
Paul L. Martin : "JA- McD sales fell for the first time in a decade last November (2012). I agree bad economy indicates rotatin to fast food, but overall industry appears soft as well.http://www.restaurantmagazine.com/wp-content/uploads/2013/01/Restaurant-Performance-Index-Declined-in-December.jpg"
Ira Selwin : "REPRICE: 11:18 AM - Chase Worse"