Today's bond market activity was similar to yesterday's in the sense that prices and yields continue to trade in clearly-defined and exceptionally narrow ranges. MBS have been outperforming Treasuries on this front, however, as Fannie 3.5s did not dip into weaker territory this morning whereas 10yr Treasuries did.
That weakness was already in the process of correcting back toward the range when the weaker-than-expected Consumer Confidence numbers helped it correct even more. The rally paused after the Fed's scheduled buying operation ending at 11am, and awaited the end of the 5yr Treasury auction at 1pm. A strong auction paved the way for trading levels to return in line with yesterday's best.
Despite higher volumes during the domestic session, the day still had the feel of a slow, inconsequential session. Conviction was lacking and bond markets clearly weren't inspired to do anything new or bold based on today's data. The lion's share of the blame for this likely rests with a Retail Sales report that came in as-expected at the core level--not much drama there. Tomorrow provides more opportunity for inspiration with ADP employment, GDP, the last Treasury auction, and the FOMC Announcement.
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 4:04 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
Treasuries Surge (Relatively) to Best Levels; MBS Follow
Any risk that had been increasing earlier is out the window for now. Treasuries just moved quickly to their best levels of the day. The move began just before 1:30pm and causality is unclear for now.
Whatever the case, 10yr yields dropped from 2.52 to 2.506 fairly quickly. Herein lies the "relative" qualifier in the title, because that's not much of a movement on an average day, but looks big against the backdrop of abnormally narrow ranges.
10's are already back up to 2.511 and MBS are holding around 102-22 in Fannie 3.5s. Long story short, it's not a sustained move of epic proportions, but whereas we were heading in to the auction near the worst levels of the day, we're currently sitting near the best levels of the day.
MBS Near Lows Ahead of Auction; Reprice Risk Mostly Contained
Based solely on the 2-day chart, MBS movements look relatively intimidating. Keep in mind that prices are only 4 ticks (.125) lower from their highs just before noon and only 3 ticks lower from the highest possible prices during morning rate sheet print times.
Technically, a negative reprice or two could be possible at current levels, but it's not too likely. That said, bond markets are definitely under some small amount of pressure heading in to the 5yr Note auction, but it will be the post-1pm trade that would be most informative.
Live Chat Featured Comments
Bryce Schetselaar : "First Mortgage Corp, Pac Union, AFR etc etc. There are quite a few"
Bryce Schetselaar : "CMG, Freedom, Pactrust (Banc of California)"
Jason Zimmer : "does anyone know any wholesalers doing NOO FHA Streamlines?"
Jason Harris : "Brent....it the sub is a harp it should be pretty quick...if not....a couple weeks....30 days seems long in current market (maybe a few months back it would have been that long)"
Brent Borcherding : "Anyone subordinated with PNC Bank as of late? How long did they take?"
Morgan Hammer : "Yep JA just had a refinance fall apart b/c of layoff"
Jeff Anderson : "Uh, oh. Just got the 2nd email from a recent prospect about getting laid off. Anyone else seeing those pick up speed? I hope it's not a trend again."