A good measure of weakness worked its way through bond markets early in the overnight session. Asian market hours saw 10yr yields climb over 2.06 briefly with European market hours helping reign things in. Weaker GDP data in Europe combined with bond-market-friendly comments from ECB Governor Constancio helped German Bunds surge quickly lower in yield with Treasuries following reluctantly. All that "stuff" amounted to MBS opening in line with yesterday's most frequently visited high of 102-22 (outright was 102-26). Stronger Jobless Claims forced a dip to 102-19, but said dip was quickly bought (and sold in stocks) as markets thought better of reading too much into a low Claims print when some of the data may be distorted by the inability of residents to navigate various stretches of frozen tundra in the Northeast to get to their local unemployment office. MBS regained 102-26 as a result and Treasuries fell to 2.02 from 2.05+ highs immediately following Claims. Both sides of the market have been trending "risk-on" since then (down in price for MBS).
MBS Pricing Snapshot
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Pricing as of 11:07 AM EST
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Bond Markets Stabilize After Knee-Jerk Claims Bounce
While it may be premature or altogether inapplicable to refer to anything in bond markets as "stabilizing," we can at least take some solace in the fact that we've now recaptured the losses seen after this morning's stronger-than-expected Jobless Claims numbers.
Sadly, even after the bounce back, 10's currently remain mostly on the other side of yesterday's high yields, threatening to make yet another "ratcheting move" higher unless we continue to pick up steam this morning.
The overnight session started out poorly with 10's trading as high in yield as 2.064 in Asian hours. In a break from recent traditions, the European session actually helped Treasuries recover as weaker GDP data and dovish comments from ECB's Constancio conspired to usher German Bunds a hefty 6bps lower in less than 2 hours! Treasuries were willing to follow, but only to the the tune of 3bps at first, though they caught an extra 1.5 in the next two hours, bringing the overnight low to 2.025.
That's strikingly close to the current 2.0243 on screens presently, and a far cry from the 2.054 seen in the moments following Jobless Claims data. MBS opened at 102-22, near yesterday's modal highs, fell precisely to yesterday's lows of 102-19 after Claims, and have actually eclipsed yesterday's highs in the bounce back, currently sitting right on them at 102-25.
30yr Auction at 1pm
ECON: Jobless Claims Much Lower Than Expected
- Claims 341k vs 360k Consensus
- Continued Claims 3.114 mln vs 3.2 mln consensus
- Continued Claims Lowest Since July 2008
In the week ending February 2, the advance figure for seasonally adjusted initial claims was 366,000, a decrease of 5,000 from the previous week's revised figure of 371,000. The 4-week moving average was 350,500, a decrease of 2,250 from the previous week's revised average of 352,750.
The advance seasonally adjusted insured unemployment rate was 2.5 percent for the week ending January 26, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending January 26 was 3,224,000, an increase of 8,000 from the preceding week's revised level of 3,216,000. The 4-week moving average was 3,211,000, an increase of 13,750 from the preceding week's revised average of 3,197,250.
Live Chat Featured Comments
Matthew Graham : "so that's +3-09 gap between today's prices and yesterday's, which were based on two different coupons. The refunding auction generates a new coupon, so it takes a much higher price on the new 2.0% coupon to get the same yield as the lower price netted on the 1.625% coupon (sorry if I'm overexplaining or not explaining clearly enough, and yes! Dream until your dreams come true! ♫♪♫)"
Lion : "Thanks, I can only dream, can't I :-)"
Matthew Graham : "funny... it was last night for like 2 ticks! We were at 1.68! (not really, of course, it was just a factor of the coupon being changed from 1.625 to 2.0 after y'day's auction, and new prices in the 99's were coming in vs y'day's prices in the 96's)."
Lion : "MG, when is that positive 310 basis point move in the 10 year going to be reflected in the yield?"
Oliver S. Orlicki : "would love to see us over 103 again. Then we can start hopefully moving towards 104 again"
Oliver S. Orlicki : "boy do we need a good auction today"
Brent Borcherding : "Very early but this is the first opening in some time that stocks show the potential for a significant move downward."
Brett Boyke : "IL and CT were estimated numbers"
philip mancuso : "Not sure how many sessions until this turns. Market clearly doesn't want to rally. Not sure how this undoes euro news. There's just no fighting it at this point. "
Jeff Anderson : "Curious to see how the blizzard affected the #'s. or could they have?"
Matthew Graham : "RTRS- US CONTINUED CLAIMS LOWEST SINCE JULY 12, 2008 WEEK, INSURED UNEMPLOYMENT RATE LOWEST SINCE JULY 26, 2008 WEEK "
Matthew Graham : "RTRS- US CONTINUED CLAIMS FELL TO 3.114 MLN (CONS. 3.200 MLN) FEB 2 WEEK FROM 3.244 MLN PRIOR WEEK (PREV 3.224 MLN) "
Matthew Graham : "RTRS- US JOBLESS CLAIMS FELL TO 341,000 FEB 9 WEEK (CONSENSUS 360,000) FROM 368,000 PRIOR WEEK (PREVIOUS 366,000) "
Victor Burek : "due to auction yesterday, new coupon"
Dan Clifton : "what is the the 10 year showing +3-07? that does not seem correct"
philip mancuso : "I think mbs needs stocks to open to rally. 8:30 will have something to say about that though. I'm going out on limb here and say that claims come in high and we see plus 10 or more. "
Craig LaBruno : "GM!!!! Happy Valentines Day!!! MBS's please show us some love!!!"
Adam Dahill : "Good morning valentines. Lets hope MBS shows us the love we deserve "
Victor Burek : "with all the negative gdp's coming out, surprised we arent more in the green"
Thomas Quann : "morning VB, good to see green after yesterday's 2.06"
Ira Selwin : "It hit 2.06 at one point in thw wee hours this AM"