Against the backdrop of a silent data calendar, bond markets are on the ropes. Both MBS and Treasuries have been grinding uncomfortably against Friday afternoon's weakest levels (10yr Treasuries are slightly higher while MBS are right in line). We've already seen one negative reprice--a rather defensive move considering prices are no more than 2/32nds weaker from the earliest rate sheets of the day. Lenders pricing later in the morning will have had a chance to adjust initial rate sheets for the ongoing weakness. Without any meaningful events on the calendar today and tomorrow, all we have to watch right now is the trading ranges set up by Friday afternoon's best and worst levels. Treasuries bounced back and forth inside that proximate range in the overnight session and MBS have only been awake long enough to move from the highs to the lows. A break of either side of these ranges would be the next clue for momentum heading into Wednesday's FOMC Minutes, but so far it seems safe to assume that the tone is "defensive" as opposed to "optimistic."
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 11:06 AM EST
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
Treasuries and MBS Pushing Weakest Levels
Bond markets have weakened steadily since 8:20 (coincidentally the CME/Treasury Futures open) and are now at their weakest levels of the day even as the Fed begins it's scheduled 30yr bond buying. 10yr yields haven't broken above overnight lows of 2.875, but they are challenging domestic session highs at 2.867. Fannie 4.0s are down 10 ticks on the day currently at 102-10.
The silver lining to this weakness in terms of reprice risk is that MBS prices had fallen to 102-12 before lenders put out their first rate sheets of the day. This likely serves to mitigate almost any reprice risk, though it would be increasing if we move another 2-3 ticks lower from here.
Sideways and Weaker Overnight; No Data on Tap
Treasuries began the overnight session several bps weaker/higher than Friday's latest levels and continued higher during Asian hours. The onset of European hours offered the first chance for a correction, but it was modest, resulting only in a move from 2.87 back toward opening levels of 2.84. Since then, volume and activity picked up as 10's returned to the other side of the range before descending again into the domestic open.
The first hour of domestic trading has seen another bounce at 2.84, but yields only went as high as 2.851 before holding ground and returning back into 2.84's. MBS began the day in roughly the same territory as Friday afternoon and Fannie 4.0s are currently down 4 ticks at 102-16.
There are no significant schedule economic reports today and we're essentially just waiting for any new trading sentiment to manifest itself. For now, the tone is defensive with Treasuries obviously having second thoughts about breaking overnight low yields at 2.84, but look even less eager to return to overnight highs at the moment. MBS are in a similar boat with prices stuck between Friday's afternoon lows and highs.
Live Chat Featured Comments
Victor Burek : "so I don't think they lose credibility if they don't taper...plus ben is leaving, the next fed chairman can always blame him"
John Tassios : "Until then, FED will taper, not to lose credibility in markets, even if it risks lowering economy because of it"
Victor Burek : "that's very likely to happen"
John Tassios : "The cooling housing market will push economy GDP further down because of higher rates, the stock market will then follow with a correction down too"
Victor Burek : "Plaza Eliminates Escrow Waiver Price Adjustment on Conventional Programs*"
Victor Burek : "we probably wont see a big rally if they don't taper in sept"
Amitab Mukerjee : "VB: I think markets will pucker in anticipation anyway. Even if they don't taper, market won't breathe relief since it could come in Oct. I think this is how the Fed planned to get this going...."
Victor Burek : "I still don't think they taper in sept..but it is coming eventually"
Amitab Mukerjee : "then bomb drop on Sept 18 or whenever"
Amitab Mukerjee : "I don't think it will do anything to the market. Going to say samething"
Amitab Mukerjee : "When are the minutes released? Wed?"