We're once again seeing tradeflows overpower economic data in terms of bond market motivation. Most of this morning's data was stronger than expected. This would typically result in lower MBS prices and higher Treasury yields.
The opposite is true this morning, with both MBS and Treasuries moving back in line with Monday's levels. That's not an extreme movement, but it does go against the suggestion of the data, as do the stock market losses.
In fact, equities have been highly correlated with bond yields in the past 2 weeks. This speaks to the year-end tradeflow considerations we've been discussing where money managers are compelled to hold or close certain positions into the end of the year. In other words, we may be seeing a fair amount of "asset allocation" trading whereby stocks benefited into year-end at the expense of bonds, with the phenomenon unwinding to some to-be-determined extent as we begin the new year.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing
is available via MBS Live.
| MBS || |
95-05 : +0-07
99-18 : +0-07
103-04 : +0-07
| Treasuries || |
0.3840 : +0.0000
2.9816 : -0.0244
3.9184 : -0.0236
| Pricing as of 1/2/14 11:56AMEST |
Morning Reprice Alerts and Updates
10:48AM : Bond Markets Improve Despite Generally Stronger Data; Some Resistance Now
9:22AM : Holding Modest Gains After First Round of Data
8:48AM : SERVICE ALERT: Live Stream is Temporarily Unavailable
Live Chat Featured Comments
Matthew Graham : "RTRS- US JOBLESS CLAIMS FELL TO 339,000 DEC 28 WEEK FROM 341,000 PRIOR WEEK (PREVIOUS 338,000) "
Jason Anker : "con't claims include those people who no lounger get long term bennies right? lots fell off 12/31?"
Victor Burek : "this claims was for last week"
Victor Burek : "and I believe continued claims is 2 weeks delayed"
Matthew Graham : "RTRS- ISM REPORT ON U.S. MANUFACTURING SHOWS PMI AT 57.0 IN DECEMBER (CONSENSUS 57.0) VS 57.3 IN NOV "
Matthew Graham : "RTRS- ISM U.S. MANUFACTURING NEW ORDERS INDEX 64.2 IN DECEMBER VS 63.6 IN NOV "
Matthew Graham : "RTRS- ISM U.S. MANUFACTURING EMPLOYMENT INDEX 56.9 IN DECEMBER VS 56.5 IN NOV "
Matthew Graham : "New orders, highest since 4/2010 and Employment highest since 6/2011"
Victor Burek : "stocks aren't impressed, moved lower since report"
Andy Pada, Jr. : "and we are below 3"
Mike Drews : "nice start to the new year."
Chris Hooker : "I'm really confused, is good news actually bad news again? "
Matthew Graham : "Same phenomenon discussed last week where tradeflows trump data. Low volume helps facilitate it as well."
Mike Drews : "the same phenomenon can bite us in the you what what."
Andy Pada, Jr. : "an FHA loan that is approved via an AUS with a dti of 48% and is also a higher priced loan is still considered QM?"
Ira Selwin : "Yes - QM - rebuttible presumtion"
Andy Pada, Jr. : "if the dti were 48 but the loan was NOT higher priced, would it be QM- safe harbor?"
Ira Selwin : "yes"
Andy Pada, Jr. : "gotcha; so the higher priced aspect has to do with the higher priced calculation only?"
Ira Selwin : "correct"
Wells - Better"