MBS Pricing Snapshot

(Note: this "morning update" is being classified as an alert because the price movement in relation to the time of day makes for a small chance of negative reprices from the earliest-pricing lenders).

Treasuries began the overnight session heading higher in yield after stronger than expected economic data in Asia. The next leg up for yields came at the transition into European hours. Core European debt moved into similarly weaker territory as stock prices rose.

Some of the weakness can be attributed to strong data, while we'd also assume some auction preparation at home (yields building in a concession for the auction cycle that begins today). Corporate issuance (large companies issuing bonds usually sell US Treasuries to effectively lock in their rate of return when the bond is priced as a Treasury yield + a margin) is also a factor, but there's a pervasive increased appetite for risk underlying it all.

And underlying that increased risk appetite is Syria headlines. The biggest news came earlier this morning when Interfax news agency reported Syria accepted a Russian proposal to put chemical weapons under international control. While this doesn't necessarily "solve" the Syria problem, it's cold water for the geopolitical risk trade that had kinda, maybe, sorta been a net benefit for Treasuries.

For all the ostensible damage, trading levels are hanging in there for now--holding above the opening lows. Fannie 4.0s are down 7 on the day at 102-18 (3 ticks off lows). 10yr yields are 4bps higher from yesterday at 2.955. If 10's break overnight highs at 2.964, it would likely put more pressure on MBS.