Like a 'tyger in the forests of the night,' equities markets lie in wait for the cash open at 9:30am at which point they found themselves with a choice at the 1495 technical level (or maybe with a PLAN!). 'Fearful Symmetry' ensued as equities made shapes very similar to Monday's sell-off, but this time in the other direction. Bond markets weren't much interested until the afternoon hours when technical support broke down in MBS, Treasuries and Euros. Big tradeflows and asset allocation trades exacerbated all of the above and the "risk-off" lever that had so recently benefited bond markets on Monday--after taking a day to chop around yesterday--now heads back in the other direction. At least THAT'S WHAT WE'RE MEANT TO THINK! Perhaps we just witnessed one big rope-a-dope from equities traders who missed out on the selling Monday and wanted to set the pins back up again--that was the joke today anyway... Whether or not there's a shred of truth to it remains to be seen, but given the flatness of the Euro since bottoming out in the wee hours yesterday morning, it seems like the "risk-on vs risk-off" trade is genuinely soothed that the rhetoric hasn't been more vitriolic out of Italy.
Month-end tomorrow for bond markets continues to provide a generally supportive undertone, all things being equal, and there's plenty of data on tap over the next two days that could take things in either direction, but ultimately, any big news out of Europe still has the potential to set the tone into the weekend.
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 4:05 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
MBS At 2-day Lows, Reprices Now Probable
Big technical breaks in EUR/USD as well as Treasuries and equities have precipitated a similarly big technical break of the supportive zone that had been holding around 103-15 to 103-16 in Fannie 3.0s for most of the past two days. Fannie 3.0s are now down 5 ticks at 103-11, their lowest levels in 2 days. Negative reprices have moved from being a good possibility to being "probable" for most lenders, especially the ones that haven't repriced already.
Negative Reprice Risk Persists As Euro Leads Bonds Lower
While we don't yet have the newswire to attribute the move to, the Euro just popped close to its session highs, pulling stocks and Treasuries higher in the process. MBS are under pressure, now at their lows of the day at 103-15 and reprice risk is increasing again after backing off somewhat in the past hour.
Post-EU Close, Stocks Continue Rising, Pressure on MBS
The alert is essentially the headline... It's been a tough late-morning and early afternoon for MBS and Treasuries with the latter approaching a short-term technical support level at 1.886. A break above would likely coincide with a break below 103-15+ for Fannie 3.0 MBS and increase negative reprice risk. S&Ps are up 7-8 points since the European close, keeping some "risk-on" pressure on bond markets.
All that said, MBS are STILL holding on to 103-16, thus still technically in positive territory on the day, but the testing of a break lower has become more frequent in the past few minutes. Negative reprices risks have probably already elevated somewhat due to the increased concentration of price action around the lows of the day with the most developed risks occurring with a marked break below 103-15+.
Live Chat Featured Comments
Roger Moore : "REPRICE: 3:36 PM - Franklin American Worse"
Roger Moore : "REPRICE: 3:35 PM - NYCB Worse"
Eric Franson : "REPRICE: 3:30 PM - Wells Fargo Worse"
Jeff Anderson : "REPRICE: 3:26 PM - Chase Worse"
Tom Schwab : "REPRICE: 3:11 PM - Plaza Worse"
Scott Valins : "REPRICE: 3:10 PM - Cole Taylor Worse"
Michael Tadros : "REPRICE: 3:10 PM - Provident Funding Worse"
Tom Schwab : "REPRICE: 3:07 PM - AMC Worse"
Tom Schwab : "REPRICE: 3:06 PM - Flagstar Worse"
Eric Franson : "REPRICE: 12:58 PM - Wells Fargo Worse"
JRS : "REPRICE: 12:46 PM - Suntrust Worse"
Nate Miller : "REPRICE: 11:46 AM - GMAC Worse"