Janet Yellen's prepared remarks for tomorrow's confirmation hearing were released at 4:30pm today. While there was little reason to expect a significant reaction in bond markets, we got one just the same. In fact, it was the only noticeable source of inspiration in an otherwise uninspired day.
The only problem is that nothing jumps off the page as the clear source of the positive reaction. The most insightful thing that could be said about it at the moment is that she doesn't mention a reduction in asset purchases, but what do markets expect the first question to be about at tomorrow's hearing?
Bottom line, Yellen said nothing she hasn't already said before, but the modicum of positivity was enough to send snowballs rolling wildly down the hill amid late session illiquidity. In plainer English, that means that trading levels are easier to push around at this time of day, and all it took was some unexpected strength to set off a chain reaction of forced buying.
The pricing snapshot below is outdated and Fannie 3.5s ended the day up 19 ticks at 101-04.
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
10yr Treasury Auction Preview
Treasury Auction Jargon Refresher
, if needed.
Today's 10yr auction is a "refunding" (as opposed to a "reopening"). Refundings historically average slightly lower demand (as measured by bid-to-cover or "BTC"). BTC's have recently been in the 2.5's with one exception at 2.86.
Refundings also tend to come in below the running forecast (as measured by "when-issued" yields or simply "WI"). WI is currently at 2.751, but the 1pm WI level is the benchmark against which the auction's high yield is judged.
10's have been improving for the past two days after hitting overnight high yields early yesterday morning. They'd typically build in a concession ahead of an action. The fact that they aren't could be an early hint at more latent positivity than we've seen so far. As such, if the auction is stronger than expected (i.e. BTC in the 2.6's or higher and yields below the 1pm WI), it would be a fairly optimistic commentary on the battle for support around 2.75%.
Positive Reprice Potential as MBS Gain More Than 3/8ths of a Point
Fannie 3.5s are now up just over 3/8ths of a point to 100-31. 10yr yields are at session lows, down 3.5bps in yield to 2.7311 despite the looming auction at 1pm (auctions tend to draw out a bit of preemptive bearishness as traders build in a concession for new supply). Some lenders may be considering a positive reprice if current levels are held or improved upon, but it's important to note that the trading range is fairly narrow. Most of these gains were intact during initial rate sheet print times.
Live Chat Featured Comments
Timothy Baron : "Then it should be paid out on the HUD to the buyer's agent. Not charged to the buyer on the HUD and then paid by seller concession. No?"
Jason Anker : "the buyer agreed to pay. these are common with FSBO's and some markets. its in the buyers best interest to have someone pay this and not them"
Timothy Baron : "Probably because the seller concession is supposed to benefit the buyer, not their agent?"
Jason Anker : "having a debate about IPC's (Seller concession) - anyone have any info on why a Seller concession could not be used to pay a buyer agents comission shortage?"
Matthew Graham : "last major instance of Yellen-speak was about a month ago. She said there's some progress but more needs to be done to strengthen economy. "too many people still can't find a job." She noted need for vigorous debate followed by Fed uniting behind the decision. I don't feel like she's blindly in favor of QE, especially when she notes the importance of safeguarding the financial system and not undermining the recovery by letting inflation get out of hand. I wouldn't be surprised to see all of"
Christopher Stevens : "I would think Yellen will spend some time defending the Feds easy monetary policy "
Scott Valins : "10s were correct"
Matthew Graham : "illiquidity is all I got for now. 10's say it should bounce back. Could be nothing more than market making and position shuffling."
Raul Lopez : "What is cooking right now that is pushing MBS?"
Tom Schwab MLO-77107 : "REPRICE: 1:41 PM - AMC Better"
Victor Burek : "agreed, not gonna happen"
Matt Hodges : "i wouldn't put any stock in that happening"
Jay Rafuse : "Ok Guys...Question: What are the chances that HARP eligibility start dates will be extended beyond May, 31st 2009? Is there any talk of this happening? I have a client who financed in Dec of 2009 and could really use a HARP loan. Thanks!"
Matthew Graham : "medium low. We did have a relief rally--it just happened before the auction instead of after."
Steve Chizmadia : "MG, how is volume? I would think we'd have a nice relief rally after a strong 10 year auction, but it looks as if I'm wrong. "
Victor Burek : "maybe now lenders will pass along some reprices"
Matthew Graham : "Solid A, but not an A+"
Matthew Graham : "RTRS- U.S. 10-YEAR NOTES BID-TO-COVER RATIO 2.70, NON-COMP BIDS $46.60 MLN "
Matthew Graham : "RTRS- U.S. SELLS $24 BLN 10-YEAR NOTES AT HIGH YIELD 2.750 PCT, AWARDS 62.67 PCT OF BIDS AT HIGH "
Amit Gandhi, MBA : "nice, I havent seen the charts this nice in the last week!"