We'll be among the first to tell you that stocks and bonds clearly vary in their level of correlation. At times stock prices and bond yields will move in opposite directions on one day while following each other closely the next.
For the most part, the long-standing conventional wisdom is that bond markets tend to benefit when stock markets are suffering. That definitely was NOT the case for much of the past 5 years, but it has generally been the case in late 2013 and early 2014. Now that the scope of pain in stocks has widened, it's also widening to scope of the bond market rally.
Today was biggest example of the "stock lever" so far in 2014 as S&Ps shed over 40 points, resulting in 10yr yields dropping nearly 10 basis points. As is typically the case for these types of moves, MBS can't quite keep pace, but still had a great day, moving 10 ticks higher to 105-04 in Fannie 4.0 coupons. Fannie 3.5s were stronger--up 17 ticks at 102-02.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing
is available via MBS Live.
| MBS || |
97-31 : +0-20
102-02 : +0-17
105-04 : +0-10
| Treasuries || |
0.2961 : -0.0439
2.5752 : -0.0908
3.5274 : -0.0936
| Pricing as of 2/3/14 5:10PMEST |
Today's Reprice Alerts and Updates
4:58PM : Heading Out at Best Levels
10:18AM : Bond Markets Surge After Weaker-Than-Expected ISM Data
9:00AM : Bond Markets Slightly Weaker; Holding Ground so Far
MBS Live Chat Highlights
Bryce Schetselaar : "I don't do a whole lot of HARPs. Can an OO go from a fixed to an ARM on Fannie DURP? I seem to remember that not being an option"
Scott Valins : "Freddie doesn't allow it. Fannie does"
Matt Hodges : "The mortgage loan type may change from a fixed rate
mortgage to an ARM provided there is a reduction in the P&I payment."
Matt Hodges : "Freddie: Note: If the Mortgage being refinanced is a fixed-rate Mortgage, the new Relief Refinance Mortgage may not be an ARM."
Ashley Sanchez : "After a short sale, can any of you take the app prior to it seasoning 36 months as long as it closes after?"
Matt Hodges : "i closed one several days after 3 years, so yes I took it prior to 36 months"
Christopher Stevens : "MG- what's your gut feeling on the 10YR? Does it even out tmrw due to lack of economic news (at least domestically) in preparation of Thur/Fri releases? "
Matthew Graham : "It's almost like Treasuries are "going out for a pass" based on how far they think stocks can sell-off. There's a limit to that eventually, and we're now getting in to the lower range technicals from 2.55 to 2.47. If stocks stop bleeding, we could see a bounce anywhere in this range."
Sung Kim : "that's what scares me, a stock fueled rally"
Bert Swyers : "weds-fri gonna be a wild ride"
Sung Kim : "the idea of tapering and lower rates is very counterintuitive but this also tempers inflation expectations as well"
Ted Rood : "What inflation expectations? Last Fed speak I hear was more concerned about lack of inflation than too much??"
Victor Burek : "i think it is due to wages...the biggest driver of inflation is wages...and part time jobs don't pay as well, so we have no wage inflation"
Sung Kim : "MG you seem to be saying that people are hedging against equities with bonds?"
Matthew Graham : "not really SK, just that bond markets aren't fighting the trend. "
Sung Kim : "i am starting to question my ebulliance with these moves, quite frankly, i get your skepticism"