There's a hint in the headline. 'Nominal' is a funny word because even dictionaries can't seem to decide if it connotes deficiency or sufficiency. Star Trek fans might recall "all systems nominal," and infer sufficiency>deficiency argument. However, due to the latin root "nomin" or "name," as well as some dictionaries offering definitions that include "in name only." deficiency>sufficiency is probably most in tune with the soul of the word. More to the point, it's a bit open to interpretation. If bond markets are fighting a nominal fight, and considering the etymological debate above, we could either conclude that MBS and Treasuries were "sufficiently resilient," or resilient in name only. The latter is closer to the truth.
All that to say: bond markets rallied and sold as little as possible in order to keep pace with Euros and Bunds today. Once European markets closed, there was some spillover money that benefited both stocks and bonds, but that benefit was only made possible by apallingly low volume. The response to Cyprus has been deceptively large in terms of the ongoing focus paid to the topic. The last 4 days of market movement have been very nominal indeed (moving in name only), because of how professional US bond markets have become at trading an EU panic event.
Flashback: Monday morning in Asia. Cyprus news hit and Treasuries immediately moved to THE EXACT SAME RESISTANCE THAT PREVAILED ALL WEEK! Monday afternoon's high yields were the highs of the week! Game over! It was DONE, THEN, black and white, clear as crystal! Very very very simple ifs and thens... Either Cyprus blows up the whole Eurozone or it doesn't. It's a yes or no answer, and we've been waiting inside Monday's range ALL WEEK for an answer. We don't have an answer yet, so we're still waiting, and we're VERY tired. It's almost insulting to look back on the past 4 days and think that anyone pretended any of it mattered. Truly, the fight was perfectly nominal.
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 4:08 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
Holding Up Nicely Post-EU Close. Reprice Risk Shifts Positively
Earlier lows for MBS were relatively short lived owing to a series of headlines that poked holes in the earlier "risk-on" sentiments. The first of these was the ECB's rejection of Cypriot revisions to the bailout deal, followed up more recently by the news that the ECB is RAISING the required contribution amount from €5.8 bln to € 6.7 bln citing "worsening conditions." I guess you could say the ECB just repriced for the worse?
Humor aside, where once there was red, now there is green. MBS are still broadly in the same range that prevailed earlier, but now pushing the highs instead of the lows. Negative reprice risk is replaced by neutrality and the outside possibility of positive reprices (already one from Provi)
It's getting late in Europe and thus the headline mill may slowly stop churning at such a ferocious pace. Bottom line: cruising in solid territory into the weekend with more positive reprice risk than negative. The only major caveat is that we'll be susceptible to European headline risk on Monday morning and it could take things in either direction in a big way.
Fannie 3.0 +0-03 at 102-29
10yr yields flat at 1.9163
S&P up 10 at 1555.20
Live Chat Featured Comments
John Rodgers : "USDA News - the House overwhelming passed the Senate’s version of the Continuing Resolution (CR) in order to fund the government for the remainder of the fiscal year. The CR now goes on to the President for signature. SEC 731 Notwithstanding any other provision of law, any area eligible for rural housing programs of the RHS on 9/30/2012 shall remain eligible for such program until 9/30/2013."
Rob Clark : "second on 30 year only"
Rob Clark : "REPRICE: 3:32 PM - Provident Funding Better"
Matthew Carver : "REPRICE: 3:04 PM - Flagstar Better"
Michael Schroeder : "REPRICE: 2:29 PM - Interbank Better"
Matthew Graham : "RTRS- CYPRUS TALKS EXAMINING LEVY ABOVE 10 PCT ON DEPOSITS OVER 100,000 EUR - PARTY OFFICIAL "
Matthew Graham : "RTRS-CYPRUS IN TALKS WITH TROIKA REGARDING LEVY ON BANK DEPOSITS OVER 100,000 EURO - RULING PARTY OFFICIAL"
James Barnes : "Senate and House Approve Continuing Resolution Bill
H.R. 933 (http://www.gpo.gov/fdsys/pkg/BILLS-113hr933pp/pdf/BILLS-113hr933pp.pdf) specifically addressed eligible areas for USDA Rural Housing; SEC. 731. Notwithstanding any other provision of law, any area eligible for rural housing programs of the Rural Housing Service on September 30, 2012, shall remain eligible for such programs until September 30, 2013.
Victor Burek : "just reading that fitch put uk on negative watch cause debt will be higher than expected"
Victor Burek : "TROIKA SAID CONDITIONS WORSENED...what conditions worsened from just a few days ago"
Brent Borcherding : "Hard to imagine that isn't a direct push out."
Victor Burek : "wow...seems like they might be pushed out of eu "
Brent Borcherding : "Yes, Victor."
Victor Burek : "so mg, cyprus now has to come up with more money to get bailout?"
Andy Pada : "Nothing new, but everyone should check out the 12:05 newstream post of Santelli. I, of course, disagree, but would be interested to hear other thoughts."
Matthew Graham : "TROIKA HIKED CYPRUS CONTRIBUTION TO E6.7 BN VS E5.8 BN: SOURCE"
Matthew Graham : "RTRS- ITALY'S BERSANI SAYS SAYS IS DETERMINED TO FORM GOVERNMENT THAT CAN BRING NECESSARY CHANGE AND REFORMS "
Matthew Graham : "RTRS- ITALY'S BERSANI SAYS WILL IMMEDIATELY BEGIN MEETINGS WITH OTHER PARTIES TO SEE IF CAN FORM A GOVERNMENT, THEN REPORT BACK TO PRESIDENT "
Matthew Graham : "RTRS - ITALY PRESIDENT NAPOLITANO ASKS CENTRE-LEFT LEADER BERSANI TO SEE IF THERE ARE THE CONDITIONS FOR HIM TO FORM A GOVERNMENT "
Rob Clark : "REPRICE: 12:33 PM - Provident Funding Better"