Whether we're talking about ceilings in terms of MBS prices or floors in terms of Treasury yields, the specific cross-section of "bond markets" we're most interested in, is having some problems with RESISTANCE so far this morning. For MBS, that's played out at 103-04, but given Friday's roll and the MBS-specific volatility surrounding it, we're more concerned with the technical implications of the resistance seen in Treasuries. In terms of 10yr yields, we descended gently throughout the European session and eventually shifted to a sideways course in the 1.95's. While we traded under 1.95 on Thursday and briefly on Friday, before then, it's been a tough nut to crack since January 28th. There's not some epic technical battle going on here though. The session is extremely lethargic so far, and unless they do something different than what they've done so far today, markets are biding their time until more motivational events arrive. For what it's worth, this leaves more room for weakness than strength, with February's trend of consolidation able to accommodate almost 1.98 by 3pm today. Anything above that would be more of a concern whereas anything below 1.95 would be hopeful.
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 11:06 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 Into The Green As Markets Slowly Shed Risk
Things have been painfully slow so far this morning with no scheduled data, and no juicy headline market movers. Combine this with Asia thinner overnight participation (Asia out on holiday) and the session has simply been a moderate risk-on move during European hours followed by a moderate risk-off move in domestic hours.
the latter has seen 10yr yields fall back in line with Friday afternoon lows, but we have yet to break through those, let alone to test Friday morning's 1.937's (currently 1.9554). S&P's have come off their Friday afternoon range, by a paltry "point or two." It's all very "incidental" and "inconsequential" as far as how the relative movement looks on screens.
MBS are looking better by comparison, largely because they were so much worse by comparison at the end of last week. Thursday and Friday's underperformance set up Fannie 3.0s for a modest dose of outperformance since the open. Whereas 10yr Treasuries are 2 ticks lower in price (0.5 bps higher in yield) since Friday afternoon, MBS are 3 ticks higher.
If the risk-off trends continue through the 11am completion of the scheduled Fed Treasury purchases, positive reprice risk would begin increasing at 103-05 for the "early crowd" lenders. This is a stretch right now though. Given the quietness of the day, those 11:02am Fed results could have a perceptible impact in either direction.
Bond Markets Weaker Overnight, Bouncing Back This AM
With Japan and China both on holiday on Monday, the overnight session didn't begin for Treasuries until 2:30am (normally 7pm on Sunday night). This made for understandably light volume by the time domestic trading got underway, and exclusively driven by European markets.
To that end, German Bunds moved quickly higher in yield from 3am to 5am, perfectly retracing the weakness they experienced during Friday morning. Treasuries followed, but to a lesser extent, with 10's only moving up to 1.98 before domestic trading got underway.
Volume picked up from "non-existent" to modest around 7:20am with 10's moving lower in yield from there. MBS opened a few ticks weaker from Friday's POST-ROLL close of 103-00, but have since come back to within a tick of unchanged (currently 102-31+, down half a tick vs Friday).
10's have continued the march lower as domestic traders reject the overnight highs, currently down to 1.954. It's been a "risk-off swing for stocks as well with S&P futures shedding 3-4 points from overnight highs, now down to 1513 which is roughly in line with levels seen during the European open.
There is no significant economic data set for today, so the stock lever could continue to be in play in a general sense. Technicals and tradeflows, along with any potential headlines should help to flesh out the rest of the motivational picture.
Live Chat Featured Comments
Matthew Graham : "I also wrote up a very general, very metaphorical explanation of the roll in the consumer rate post on Friday as well. http://www.mortgagenewsdaily.com/consumer_rates/295212.aspx "
Victor Burek : "at the top of the screen, you will see Learn...you can click that and type in any subject and info will pop up"
Victor Burek : "http://mbslive.mortgagenewsdaily.com/knowledgebase/articles/21629-why-do-mbs-prices-seemingly-drop-on-notification-d"
Matt Hodges : "103-07 to 103-01"
Matt Hodges : "roll was friday afternoon, AP"
Christopher Stevens : ""The Federal Reserve Will Need a Fairy Tale Ending to Unwind it's Balance Sheet" http://www.businessinsider.com/fed-balance-sheet-fairy-tale-ending-2013-2?0=moneygame-contributor"
Andy Pada : "when did we roll?"
Victor Burek : "you can look at top right of chart shows previous close"
Jeff Anderson : "Yup. We rolled the monthly on Friday."
Victor Burek : "102-30 is what i am seeing"
Christopher Stevens : "GM all. Interesting article in todays WSJ regarding FHA and if we should shrink it's role. "
Jeff Anderson : "I like your thinking, BA. Day 4. No power and now a 102 handle.i know we rolled, but still. How about a little Green today? Too much to ask? "
Brayden Alexander : "Expected start. Great level for buyers. Back over 103 soon and in green by noon. "