Global markets reacted in a relatively predictable fashion following news late Sunday that Cyprus and the EU had reached a bailout agreement. Treasuries moved higher overnight, eventually hitting 1.97% in 10yr yields right at the start of the domestic session. That said, European markets were already hinting at a bounce back for the overnight move higher in yield. The Euro saw it's best levels in Asian hours. It then fell quickly at the start of the European session and languished sideways to lower from there. The morning's most significant movement came after Eurogroup President Dijsselbloem said that the Cyprus deal should be seen as a Template for the rest of the Eurozone. Being the next country in line for drama, Italy--and more appropriately, Italian debt spreads--led the way for the broader risk-off move. This manifested itself in a run back to positive territory for domestic bond markets, but importantly, failed to prompt a break of 1.91 in 10yr yields. Even so, the 3/8ths point swing from opening levels--an eighth of it since 10am--in MBS, should lead to a few positive reprices from early lenders.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom.
Real time pricing is available via MBS Live.
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Pricing as of 11:09 AM EST
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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 this morning.
11:07AM :
ALERT ISSUED:
Italy Paves The Way For US Bond Market Improvement
The latest spike lower in stocks, Treasury yields, higher in MBS prices, etc., was clearly led by Italy. Take a look at
THIS CHART (teal = Euros, green = Bund yields, blue = S&P futures, yellow = 10yr yields, white = inverted Italian 10yr spreads). Essentially, the lower the white line goes, the more concerned investors are about Italy.
The move comes after Eurogroup President Dijsselbloem said that the Cyprus deal should be seen as a template for the rest of the Eurozone. Yikes... Markets are been saying "yikes" ever since.
Fannie 3.0 MBS are currently up 2 ticks at 102-30 and 10yr yields are in positive territory now at 1.9163. Lenders that released rate sheets around 10am or earlier may soon be considering a positive reprice if current levels are maintained or improved upon in MBS, but we'd probably need a few more ticks before more than one or two lenders stand much of a chance to get involved with such a thing. Either way, so far so good as far as the bounce back against a potentially ugly morning is concerned!
9:19AM :
Bond Markets Bounce As Italy Picks Up Where Cyprus Left Off
Cyprus bailout news late Sunday looked to be a threat to safe-haven bond markets like US Treasuries, and by extension, MBS. Indeed, both are weaker this morning, but there's been a determined show of support in the past hour.
While the Cyprus deal spurred good volume and good selling in Treasuries during the Asian hours, the onset of European trading had a paradoxically positive effect, helping 10yr yields down from 1.963 to 1.948 in the first hour of European trading. After a quick visit to 1.97, we find 10's stampeding relatively quickly back down under 1.95 while MBS shake off opening lows of 102-19 to head back to the mid 102-20's (currently 102-27).
The culprit? A major fade of the overnight EU rally fueled, in part by a response to the Cyprus news that never quite accelerated to Euphoria, but led most convincingly by Italy. Italian bank shares fell out of the gate and political uncertainty remains a factor. The second big leg down for Euros was clearly led by Italian credit spreads with German Bunds and US Treasuries way behind the curve, but following with high correlation.
The net effect is a bond market environment that is less certainly negative than it was overnight, but characterized more by uncertainty than by directional rally probabilities. For now, support is in at 1.97 and probable resistance in the mid 1.91's if 10yr yields make it that low. A break below 1.912 in good volume before the end of the day would be a strong technical statement for Treasuries.
Live Chat Featured Comments
Victor Burek : "stocks in the red now"
Matthew Graham : "Dijsselbloem said something about Cyprus being "template" for rest of euro-zone. man, that guy is a Treasury/MBS hero so far..."
Matthew Graham : "you'll love Merkel's take on that then... From earlier: RTRS - MERKEL SAYS BELIEVES OUTCOME IS THE RIGHT ONE, THOSE THAT CAUSED CYPRUS CRISIS ARE BEING ASKED TO PAY"
Andrew Horowitz : " in both england and the US there is due process this was just plain old theft"
Jeff Anderson : "The more I read the more it just feels like stealing. No, we're just going to take it. No need to get your own govt involved. We're good here. And if you want to appeal we have that answer already. Beat it. Ouch."
Christopher Stevens : " This will be an interesting week in Italy also Should know by end of week if Bersani can actually form a govt (as Napolitano asked him to do). If he can't we may see new elections and more uncertainty. This could be what keeps the 10YR closer to 1.90 as Chris Kopec suggested last night."