The resistance theme of the week remains in play for MBS and Treasuries. Neither market has been able to successfully challenge the week's best levels seen on Monday. That said, they're close, and have had a good run of positivity from 930am to present. This follows a choppy overnight session for Treasuries where a modest drift of rally in Asian hours gave way to an abrupt sell-off at the onset of the European session only to completely reverse course and head toward the lowest overnight yields by 8am New York time. The morning rally has improved slightly on those levels and we've once again seen a pivot move past 1.70, which paved the way for a run into the 1.68's on Monday. The more time we spend under 1.70, the more possible it becomes for MBS to challenge 104-07 resistance in Fannie 3.0s.
MBS Pricing Snapshot
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Pricing as of 11:04 AM EST
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Stock Lever Helps Treasuries And MBS To best Levels
10yr yields topped out just over 1.72 after a quick trip higher heading into the 9:30am cash open for stocks. Stocks sold out of the gate and Treasuries followed. Though one degree of separation removed, MBS followed as well, moving higher in price.
As stocks have continued ratcheting lower, and as the Fed is in for scheduled buying in the 25-30yr space, 10's and MBS have progressed to their best levels of the morning. For 10's, that's 1.695 currently--down 2.5bps on the day. MBS are up 3/32nds at 104-06. This is probably enough for an early lender or two to reprice positively if we hold here or better after 11am.
10's bounced on the same pivot point from earlier this morning at 1.702, this time treating it as a ceiling rather than a floor. This gives us a line in the sand to watch in the event of weakness (next three would be 1.712 and 1.719 with 1.733 the most serious). If the positivity continues, we'd need to get through 1.683 before getting too excited, and 1.678 would be most excellent. MBS would have to get over 104-07 to challenge this week's highs. S&Ps are down a quick 20+ points, completely erasing yesterday's bounce back and putting stocks into threatening technical territory.
Choppy Overnight Session, Eerily Firm/Familiar Boundaries
The overnight session wasn't too much more volatile than the previous example but the movement between the highs and lows happened much more quickly. Speaking of those highs and lows, today's have been exactly the same as yesterday's so far.
Considering the rapidity of the move higher in Treasury yields early in the European session, the fact that they topped out right at 1.733 is exactly the kind of technical cue we were hoping to see today. Later in the European session, even faster than the earlier spike higher in yields, Treasuries notched abruptly back lower, precisely to yesterday's European lows at 1.70, following German Bunds.
The hard charge back down in yield (relatively), makes the mostly data-free session look like a concerted effort to get in position for a German Bund auction. When the auction went off without a hitch, yields quickly returned to where they came from.
US Treasuries followed those moves in lock-step, but have begun marching to their own beat with the onset of the domestic session. Early US trading helped reinforce the resistance at 1.70, but without any major fuss. 10's are only up to 1.715, still in positive territory vs yesterday and well below the near term ceiling at 1.733
MBS opened up 2-3 ticks higher and haven't done much so far this morning. Fannie 3.0's are currently +1/32nd on the day at 104-03. There's a slightly bearish tilt in play since the US open that we'll have to keep an eye on. 1.719 is a short term technical line in the sand for 10yr yields with 104-02 being the analogous level for Fannie 3.0s.
Live Chat Featured Comments
Victor Burek : "up to 97.75"
Brayden Alexander : "DK with appraisal you can roll in anything you want."
Victor Burek : "only upfront and 60 days interest but some lenders limit to 30 days"
Jason York : "with appraisal you can"
Victor Burek : "cant roll in closing or new escrows"
Dirk Postupack : "Can closing costs and escrows be rolled into an FHA streamline, or is it just current bal. and UFMIP?
Oliver S. Orlicki : "need it break below and set it as ceiling"
Christopher Stevens : "the longer the 10YR hovers around 1.70 the more I like it"
Steve Chizmadia : "Guessing he is leaning on the participation rate continuing to fall for that to happen"
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