Bond markets moved back and forth within fairly narrow ranges today, although most of that sideways movement took place at weaker levels. This was more of an issue for Treasuries, where 10yr yields spent no time in yesterday's range. MBS, on the other hand, did manage to brush up against yesterday's lows on a few occasions. Even then, it was mostly a down day.
The morning data didn't help--particularly the stronger-than-expected Retail Sales numbers. Markets were more willing to trade that versus the recently volatile Jobless Claims data. The 30yr auction was slightly weak, but the relief at being done with supply outweighed that and modest positivity continued past 2pm. At that point, participation started to suffer, and the illiquid environment favored lower prices into the final hour.
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 4:05 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
Negative Risk Taking Over Again; MBS Back Near Lows
Market participation dwindled rapidly after the 30yr auction relief rally. MBS and Treasuries leveled off and held sideways heading into 2pm, with volumes sparse since then.
Fannie 4.0s are down 4 ticks on the day at 103-07, which is 5-6 ticks lower than the stably held 103-12/103-13 range around 2pm. This brings us back to the edge of negative reprice risk for some lenders. It would be a risk for more lenders if we break below the lows of the day at 103-06.
Treasuries Challenging Pre-Auction Levels After Initial Selling Pressure
Although 30yr WI yields (the "when issued" yields used as a baseline for auction expectations--not seen on the dashboard) aren't yet back to pre-auction levels, 10yr cash yields (seen on the dashboard) are now lower than their 1pm levels.
Cornerstone MBS Live member Jeff Anderson pointed out earlier that an initial pop of selling could give way to a relief rally considering that this week's Treasury supply needs are out of the way. That assessment is looking good so far.
10's are down to 2.862 and MBS continue to outperform. Fannie 4.0s are up 1 tick at 103-12, connoting modest positive reprice potential for some lenders.
Live Chat Featured Comments
Jon : "Initial reaction is choppy. Any signs of more green on the way once traders are done with their paninis?"
Jeff Anderson : "Ok, pretty bland auction, traders run out for quick sammy, supply rally in 20 mins? Who's in?"
Paul Carlin : "Nothing exciting to see here, move along. "
Matthew Graham : "RTRS- HIGH YIELD AT LATEST 29-YEAR 11-MONTH BOND SALE WAS LESS THAN 1 BASIS POINT ABOVE ITS 1 P.M. WHEN-ISSUED LEVEL - REUTERS DATA "
Matthew Graham : "RTRS - BID-TO-COVER RATIO 2.35, NON-COMP BIDS $4.95 MLN "
Matthew Graham : "RTRS- U.S. SELLS $13 BLN 29-YEAR 11-MONTH BONDS AT HIGH YIELD 3.900 PCT, AWARDS 17.28 PCT OF BIDS AT HIGH "
Matthew Graham : "I'd only add that the refundings drag down the average a bit, so 2.42 would be low over the last 10 auctions, but still right about middle over he last 4-5 (because post May 2013 is sort of a different era)."
Jeff Anderson : "Ha. I was in mid-type and got distracted. The VB Report really was today. Nicely done, VB."
Matthew Graham : "thanks for crunching those numbers Vic! A true "VB report!" Jeff will be stoked."
Victor Burek : "the last 10 30yr auctions avg a btc of 2.42, lets hope for a higher btc"