Bond markets were weaker overnight. 10yr yields began the Asian hours just under 2.77 and made one anemic move to 2.755 before failing to break through that important inflection point. Weakness ensued and lasted until 5:30am, taking 10's just over 2.79. There was another push back toward 2.75 into the domestic session and another rejection. This is a negative development from a technical perspective as it reinforces a floor at 2.74-2.75 (which has been a solid ceiling since September's FOMC Announcement).
MBS also began the day in weaker territory with Fannie 3.5s down 5 ticks from Friday's post-roll levels. In other words, November MBS ceased trading on Friday. They were trading at 100-29. December 3.5s (our new representative of "MBS Prices") were trading at 100-19, and began today at 100-14. Today's weakness will confirm a shift to Fannie 4.0s as the better representative coupon.
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 11:05 AM EST
Morning Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts
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Bond Markets Weaker Overnight; Ominous Technical Resistance
So far this morning, we're seeing the most unfriendly technical environment for bond markets in two months. The foundation of that negativity is the well-traveled inflection point at 2.75 in Treasuries. After closing there on Friday, Asian and European trading push 10's as high as 2.792.
Both in the overnight session, and the first 30 minutes of the domestic session, yields made a run at 2.75, and both times resulted in a clearly delineated bounce. This adds even more weight to a largely negative read of technical indicators and reinforces the trend higher in rates being intact until proven otherwise.
MBS opened roughly 4 ticks weaker than Friday's latest levels. Combined with the roll, this makes for a 15 tick drop in displayed prices but only 5 ticks of implied rate sheet weakness. Fannie 3.5s are currently up 2 ticks from opening levels at 100-16. So that's 3 ticks of weakness from overnight losses and 13 ticks off from Friday's latest levels.
There are no significant points of data on today's calendar and the only quasi-significant event is the 3yr Treasury auction at 1pm. Apart from that, we're defensive against further weakness by default--watching the 2.75 technical barrier in 10yr Treasuries as a potential opportunity for short term improvement. Even then, keep in mind that such strength may simply be cause for those betting on higher rates to cover their short positions, temporarily adding to positive momentum, but not reversing the broader negative momentum.
Live Chat Featured Comments
Matthew Graham : "RTRS- D.R. HORTON INC DHI.N EXPECTS SALES PRICE INCREASE TO MODERATE UNTIL ECONOMY IMPROVES SUBSTANTIALLY AS SUPPLY CATCHES UP WITH DEMAND-CONF CALL "
Victor Burek : "don't worry, higher rates wont impact new home sales...plenty of builders have stated that"
Victor Burek : "The surge in cancellation was the largest MoM since mid-2008 and jumped to its highest since December 2008."
Matthew Graham : "RTRS - D.R. HORTON INC DHI.N SAYS WOULD OFFER INCENTIVES TO BUYERS IF SLOW DEMAND CONTINUES INTO THE STRONG SELLING SEASON-CONF CALL "
Matthew Graham : "I speak in 32nds. bond market convention is 32nds. Some mortgage folks prefer bps because it correlates to rate sheets, but it's not a true bond market convention."
Victor Burek : "I like 32nds..bps matches to your rate sheets better"
Michael Gillani : "32nds are what most people on here look at and discuss I would say"
joon choi : "which is better bps or 32nd?"
Matthew Graham : "yes MG2. 100-19 is even"
Christopher Stevens : "nice to see the 10YR heading back to 2.74 level"
Michael Gillani : "So at 100-19, we're even now,right?"
Matthew Graham : "what a mess... Prices are accurate. We are down from Friday's latest post-roll prices, but up from this morning's initial price. Typically the "change" column is calculated based on the former, but today it's using the latter. So again that's "down 3 from Friday," and "up 2 so far today.""
joon choi : "MG so we are up today?"
Matt Hodges : "6"
Dustin McAlister : "96.5%"
Dustin McAlister : "FHA purchase 97.75%, 3% max seller or 4%?"
Oliver Orlicki : "trend is not our friend"