One of the recurring questions on the MBS Live Dashboard today was simply "what's up with this weakness?"  Normally, there would be a logical connection to be drawn between an event on the economic calendar or a headline in the News Stream, but no such luck today.

This morning's commentary alluded to this in saying that markets wouldn't have much to go on, and indeed the lack of "overt market movers" ended up being the theme of the day.  Several potential suspects:

  • Corporate bond market issuance continues to be a bigger-than-normal factor so far in 2014.  As firms hedge their issuance in the Treasury market, MBS prices end up experiencing turbulence that can never be directly traced to any other source of causality. 
  • It's possible the morning strength represented short-covering--i.e. investors who'd been betting on higher rates being forced or deciding to cover those bets (this can have a modest snowball effect when it gets going)
  • Technical resistance.  This has been a frequent topic of conversation, especially with respect to the low 104 price levels in Fannie 4.0s and 2.82% in 10yr yields. 

Ultimately, looking at the closing price of 103-21 on Fannie 4.0s when we'd previously discussed the range as being 103-16 to 104-02, we can easily conclude that today's weakness is inconsequential even if it's fairly big compared to yesterday.  The bigger concern would be if it continues.  It may do that, but any movement is likely to be more subdued until we hear from the Fed next week.

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
95-24 : -0-16
FNMA 3.5
100-04 : -0-14
FNMA 4.0
103-21 : -0-12
2 YR
0.4000 : +0.0200
10 YR
2.8637 : +0.0407
30 YR
3.7603 : +0.0223
Pricing as of 1/22/14 6:10PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
4:55PM  :  ALERT ISSUED: Weakness Persists into Close; Reprice Risk Increases
3:09PM  :  ALERT ISSUED: New Lows After 3pm Treasury Close; Reprice Risk is Ongoing
12:08PM  :  ALERT ISSUED: MBS Quickly Retreat to Lows; Negative Reprice Risk
9:21AM  :  Bond Markets Near Yesterday's Weakest Levels

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
David Rudnick  :  "why the dive?"
Matthew Graham  :  "In the mid-day update DR: "There are no overt market movers in play, with markets instead paying mind to tradeflow considerations (biggest and most recent trades influencing subsequent trades) as well as probable hedging activities related to corporate bond markets""
Jeff Anderson  :  "Is volume low today with the storm in the northeast? Liquidity issues?"
Matthew Graham  :  "Not low enough to dismiss the movement."
Jeff Anderson  :  "stocks have pared about 1/2 their losses since about the same time also. Mini lever?"
Matthew Graham  :  "If I had to make a list of suspects for a line-up of potential market-movers, it would be, in no particular order: 1)asset-allocation trading, 2) corporate bond market hedging, 3) position-squaring ahead of next week's FOMC, with an eye on #4, 4)technical exhaustion of rally at 2.82 in 10's and early signs of a reversal.5) tradeflow exhaustion as much of the strength was fueled by short-covering (meaning that traders who had bet on rates moving higher were forced to become buyers to cover those bets/prevent further losses)."
Bryce Schetselaar  :  "Speaking of FHA, if there is a collection on credit for a student loan that the borrower says he doesnt owe...what is the best way to do the loan? Dispute the student loan collection?"
Ross Miller  :  "supplement to have it removed or rapid rescore if phoenix will provide a letter but definitely don't dispute it."
Sung Kim  :  "fph, your processor should be able to get a flood cert in seconds"
Frank Hanna  :  "i am trying to assist a potential client on a property she may want to make an offer on."
Michael Ullmann  :  ""
Dez Loessberg  :  "yeah, im looking for a 90% option...$670K purchase price"
Matt Hodges  :  "why not do $474/$129 and stay in the confumbo pricing"
Dez Loessberg  :  "And that's why I love this in the box thinking was doing simple don't happen to have an idea of a lender offering that 20% 2nd do you?"

Economic Calendar
Time Event Period Actual Forecast Prior
Thursday, Jan 23
8:30 Initial Jobless Claims (k)* w/e 326 326
8:30 Continued jobless claims (ml)* w/e 2.930 3.030
9:00 Monthly Home Price mm (%) Nov 0.5
10:00 Existing home sales (ml)* Dec 4.94 4.90