On many occasions in 2013, I've referred to weakness as "seemingly inexplicable."  This rarely has to do with the weakness defying explanation and more to do with the lack of overt, traditional, easily-understood explanations. 

In other words, there are general rules about how and why rates move and then there are exceptions.  An uncommonly large amount of 2013 fell into the "exception" category. 

This was made all the more confusing by the fact that economic data often DID have the expected effect (strong data, rates higher, and vice versa), but it wasn't for the historically relevant reasons. 

Case in point: inflation data ceased being relevant.  In the past, weak inflation reports tended to help rates, but CPI and PPI quickly became afterthoughts in 2013, joining the ranks of short-term Treasury auctions as something less than 3rd-tier market movers.

Enough about that though... The point is that today is emblematic of all that seemingly inexplicable movement.  Home prices decelerated further in this morning's first data.  Chicago PMI was notably weaker, with a big drop in the employment index, and Consumer Confidence was only marginally improved. 

That doesn't seem like it should add up to the highest 10yr Treasury yield in more than 2 years, but that's exactly what happened by the end of the day.  Volumes weren't high enough to suggest reading much into the movement, but tradeflows simply outweighed the fundamental events. 

MBS haven't suffered quite the same fate as Treasuries due to the fact that spreads have been generally improving since July (meaning that MBS yields are lower relative to Treasury yields).  While this is just one of the many ways to assess relative performance, at the very least, MBS can say they are NOT at their weakest levels in more than 2 years.  In fact Fannie 4.0s were almost a quarter of a point lower several times on the 26th and 27th.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
94-30 : -0-12
FNMA 3.5
99-11 : -0-08
FNMA 4.0
102-30 : -0-08
2 YR
0.3838 : +0.0008
10 YR
3.0263 : +0.0503
30 YR
3.9642 : +0.0592
Pricing as of 12/31/13 3:53PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
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

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matt Hodges  :  "in theory, the market should correct for non-warrantable translating into lower price, and thus rate should be less impactful"
tim yazawa  :  "Seems like not many lenders in STL will mess with non-warrantable. It would make me nervous to buy something that was seemingly tough to sell. "
Matt Hodges  :  "agreed, Tim... that's why the risk/reward equation is amped up "
Andy Pada, Jr.  :  "2013 in mortgage land feels like a Shakespearean tragedy."
Hugh W. Page  :  "And with that.... I say: "Good night, good night! Parting is such sweet sorrow, that I shall say good night till it be morrow." .... or day after tomorrow in this case. Happy New Year folks!"
Jeff Anderson  :  "Just tuning in to wish everyone a Happy and Safe New Year! 2014 is going to be another great year. Get after it people. And as always a big thanks for everything MG does for us. See everyone in 2014!"
Andrew Russell  :  "Happy new year guys! In some weird way we are all family! I hope the champagne at midnight tastes sweet! Onward and upward in 2014..."
Grant Menard  :  "Wishing the MND community a happy and healthy New Year. Been a pleasure sharing knowledge and learning/ growing with you all! "
Donna McKenna  :  "Happy New Years to you all "

Economic Calendar
Time Event Period Actual Forecast Prior
Wednesday, Jan 01
0:00 New Year's Day 2013/2014 *