Bond markets put in their best overnight gains in over a week this morning and have managed to defend them into the domestic session. German Bunds and to a surprisingly large extend, British government debt ("Gilts") led the charge overnight after comments from an ECB official that the EU crisis isn't over. The clearest case of cause and effect overnight was a sharp drop in manufacturing output in the U.K. Where Gilts left off, domestic traders picked up with lots of short covering early (traders closing positions that bet on rising yields, making for a drop in yields today). In a welcome turn of events, post-short-covering, Treasuries have remained better-bought, alluding to potentially supportive ceilings between 2.05 and 2.08.
It hasn't been a resounding reversal however. Despite the bounce, we've immediately seen resistance at Friday's pre-NFP levels at 2.02. It's still anyone's game at the moment and the sense of indecision (to break 2.08 or 2.02 first?) is palpable in spite of volumes that are still relatively low (though already surpassed yesterday). For their part, MBS aren't much enjoying the volatility, handily underperforming the Treasury rally today, but still 7 ticks improved vs yesterday.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing
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Pricing as of 11:09 AM EST
Morning Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts
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Bond Markets Improve All Night, Holding Gains This AM
Although Treasuries moved slightly higher in yield during the first few hours of the overnight session, the rest saw better buying. This was especially true during European hours, but more importantly, we're hearing that it's been true in general since Friday's NFP. That bodes well for the current grind over 2.00% to be something other than a consolidation before another move higher, IF we can avoid any major shocks between now and the next big-ticket market mover.
As for what that mover might be, it's still up for grabs at the moment, but the list includes the Italian political landscape, FOMC next week, tradeflow/technical snowballs, or even a freakishly huge deviation from expectations in tomorrow's Retail Sales. The one mover to rule them all would be a big miss or big beat in the next payrolls report, but given our current distance from that, we're guessing 2.0 or 2.10 will have given out well in advance.
So far this morning, we're a lot closer to testing 2.0% with 10's currently down 3 bps at 2.096 at the moment and Fannie 3.0s up 6 ticks at 102-09. Equities futures are right in line with 4pm levels and strength/stability there doesn't seem to be much of a concern for bond markets, both in general and especially post-NFP. There's no significant economic data on tap this morning and the 3yr Auction at 1pm is perennially likely to be a non-event.
Live Chat Featured Comments
rlafave : "Daniel, rule 701.03 HUD states that escrow shortages cannot be added to a streamline"
John Tassios : "Can't include the shortfall in escrow / Streamline pretty strict with this / regualr FHA you can"
Daniel Kramer : "FHA experts, question for you. In a FHA streamline refi, th eloan my borrower is paying off has a escrow shortfall of $3,000 that the current lender has been recouping by collecting a few extra hundred dollars every month with normal payment. When we order the payoff, the 3k still owed wil be part of the patiff balance. can this be included in the new FHA loan?"
Andy Pada : "thanks MG. If my suspicions are correct, the portfolio delinquency ratio is national average, at best. Which is encouraging because an average portfolio MSRs are being sold at 70 bps."
Matthew Graham : "AP, I can't find anything specific on that portfolio"
Matthew Graham : "i do not think "harp 3.0" means what they think it means."
Dan Clifton : "Did i miss and bulletin? I was not HARP 3.0 was out"
Dan Clifton : "so i get a letter in the mail today telling me that my home loan is eligible for HARP 3.0"
Andy Pada : "Anyone know what the delinquency rate on the Ally portfolio referenced in the 9:22 newstream is?"
Brett Boyke : "Like a Phoenix from the flames"
rford : "finally green! about time"
John Tassios : "Sam / The highest since last April was the 2.08 on midday friday then it fell back from that / looks like for now the upper end is 2.08 and lower end of range is 1.84"
Oliver S. Orlicki : "Stop the presses, bonds are green and futures are red. Holy cow!!"