Once you accept the truths in yesterday morning's chart (re-posted below), the rest of 2013 doesn't really matter. To recap:
- June 19 was the date of the FOMC Announcement in which the Fed formally introduced tapering prospects, prompting a 45bps sell-off over 4 days with one little phrase "The Committee is prepared to increase or reduce the pace of its purchases."
- On June 20st, 10yr yields closed at a new high of 2.471, and that has been the lowest closing level ever since.
- October 23rd (3rd white circle below) saw a moderate extension of the previous day's strength (NFP-related) collide perfectly with 2.471 and subsequently get resoundingly rejected.
- This is the point at which the government shutdown is one week in the rearview and market participants took the Fed at their word regarding Fiscal constraints holding back tapering. As such, bonds began moving slowly, surely toward levels more consistent with tapering. The NFP report on Nov 8th provided some volatility, but nothing compared to that seen over the past 4 months.
- From that point on, the sell-off was incredibly narrow and linear in it's move back to 2013 highs.
In short, we had some measure of fiscal healing, and had arrested the potentially troubling slide in job creation (no one's saying it's awesome--simply that it stopped heading in the wrong direction). All of the above equates to gradually rising rates. 3.0% 10yr yields is where the market went when it was convinced it would see tapering in September and it's no surprise to see it back now that tapering is official.
It's a fitting place to end 2013--right on the edge of the highest levels in more than 2 years. The ominous suggestion is that rates in the 2's will be more of a "2013 thing."
While that can't yet be known, what we can unequivocally know is that this morning's economic data (Case Shiller, Chicago PMI, Consumer Confidence) hasn't mattered at all compared to year-end position-squaring. Bottom line, Someone wanted/needed to sell quite a bit more Treasuries than everyone else heading into 11am. That took bonds from a sideways grind around 2.99 to a sideways grind around 3.01 instead. It's all pretty uneventful in the big picture.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing
is available via MBS Live.
| MBS || |
95-03 : -0-07
99-15 : -0-04
103-02 : -0-03
| Treasuries || |
0.3838 : +0.0008
3.0020 : +0.0260
3.9266 : +0.0216
| Pricing as of 12/31/13 12:25PMEST |
Morning Reprice Alerts and Updates
11:27AM : ALERT ISSUED: Negative Reprice Risk Rising as MBS hit new Lows
10:09AM : ECON: Consumer Confidence Stronger Than Expected
10:03AM : ECON: Chicago PMI Weaker Than Expected
9:55AM : ECON: Case Shiller Home Prices Stronger Than Expected
9:35AM : Holding Moderate Losses After First Data
Live Chat Featured Comments
Matthew Graham : "RTRS- US OCTOBER HOME PRICES IN 20 METRO AREAS +1.0 PCT SEASONALLY ADJ (CONSENSUS +0.8 PCT) VS +1.0 PCT IN SEPTEMBER -CASE-SHILLER "
Matthew Graham : "RTRS- US SEPT 20-METRO AREA YEAR-ON-YEAR HOME PRICE INCREASE LARGEST SINCE FEB 2006 "
Andy Pada, Jr. : "do we close above or below 3.00?"
Matthew Graham : "I'm not sure it matters outside being a point of curiosity. Maybe 3.02 would be more interesting as anything over that is a 2yr+ high, but only interesting from a "trivia" standpoint"
Andy Pada, Jr. : "if you are going to throw out trivia, you might as well feed us some real trivia questions on the last day of the year."
Christopher Stevens : "MG- I find your chart this morning much more interesting that a 20yr trend may be coming to a close."
Hugh W. Page : "I wonder if that trend was really coming to an end in 2008 and the Fed extended it."
Matthew Graham : "Yes HP, I think yields would have leveled off starting with the long, slow grind in 2003 had it not been for the bubble/meltdown/QE imbroglio that followed"
Matthew Graham : "RTRS- CHICAGO PURCHASING MANAGEMENT EMPLOYMENT INDEX AT LOWEST SINCE APRIL "
Matthew Graham : "RTRS- CHICAGO PURCHASING MANAGEMENT INDEX 59.1 IN DECEMBER (CONSENSUS 61.0) VS 63.0 IN NOVEMBER "
Matthew Graham : "Here's a tough-ish one... Next week's NFP historically comes in weaker half the time, as-expected 10% and stronger about 40% of the time. What do you think the average 'miss' is when it comes in weaker? A)10-30k, B) 31-50k, C) 51-70k, or D) 71-90k"
Hugh W. Page
: "MG - My respect for your MBS knowledge multiplied when I found this article and tried to read it and almost lost my mind (and couldn't finish it). http://mndne.ws/1byZfAi"