Today's calendar of economic events was empty.  There wasn't even much by way of potential market movers to evaluate.  Instead, bond markets were left to their own devices and thus able to convey some of their innate momentum and post-Yellen reaction.

As feared, the innate momentum is not that great.  This was almost a done deal yesterday, but today confirmed it.  Here's the play by play in a nutshell.

  • Rates trended lower as 2014 began
  • this was a fairly substantial correction to the trend toward higher rates that began after all-time lows in mid-2012 and more substantially in mid-2013
  • Some market participants were hoping for that correction to continue a bit longer
  • Some market participants were hoping for Yellen to confirm that the Fed noticed the recently weaker economic data and that they might do something about it.
  • Yellen stayed the course on policy stance and the bond bulls picked up stack and joined the rest of the herd, who were already wondering why rates had moved so low in the first place.
  • The correction is now officially over, and other possibilities are being explored.  Those include "flat" or "higher" (in terms of rates). 
  • Right now, we're exploring the "higher" option and it will take some intervention to flatten things out. 
  • That could come from very poor data tomorrow or it could simply happen of its own accord.  We're just now crossing an inflection point that would connote further weakness, but it relies on confirmation from another weak day tomorrow.  We'll have to wait and see if we get it.

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
96-06 : -0-12
FNMA 3.5
100-18 : -0-11
FNMA 4.0
104-04 : -0-09
2 YR
0.3430 : +0.0120
10 YR
2.7607 : +0.0437
30 YR
3.7201 : +0.0361
Pricing as of 2/12/14 4:23PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
12:46PM  :  ALERT ISSUED: MBS Drift Down to New Lows; Slightly More Reprice Risk
11:02AM  :  ALERT ISSUED: Treasuries Pushing Pace of Weakness; MBS Follow; Some Reprice Risk Building
9:34AM  :  Bond Markets Weaker, But Not Because of China

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Bert Swyers  :  "really confused by the recent selloff"
Victor Burek  :  "basically, the recent rally was due to emerging markets currency which was overblown"
Victor Burek  :  "em currency crisis"
Victor Burek  :  "now that trade is starting to unwind"
Matthew Graham  :  "2014 had heretofore been a correction in a larger trend toward higher rates. EM used as an excuse for that correction. Jobs report made Yellen testimony a moving target. She wasn't scared. Markets are both pouting about that and also continuing to unwind the corrective move from January. Who knows were it will stop. This is the first major inflection point (we're a bit past it actually, so it's quite bad if we move weaker tomorrow)."
Matthew Graham  :  "Auction coming up... Some stats: The last few bid-to-covers have been 2.68, 2.61 and 2.75. Results have been mixed as far as the yield being higher or lower than the expectation (as measured by the "when-issued" yield")"
Matthew Graham  :  "RTRS - U.S. 10-YEAR NOTES BID-TO-COVER RATIO 2.54, NON-COMP BIDS $70.20 MLN"
Matthew Graham  :  "B-"
dustin mcalister  :  "so we should hold steady on market no?"
Matthew Graham  :  "I would hold steady if I was the bond market basing my decision solely on that auction"
Brian Bockholdt  :  "MG, are you surprised to see the 10 year at 2.77?"
Brian Bockholdt  :  "Seems like week ago we have so much momentum in the other direction"
Matthew Graham  :  " Matthew Graham (2/5/14 5:30PM): the approach to this NFP seems fairly uncomplicated to me. Sure, there are those in the market that think the correction has farther to travel before being complete, but the disgruntled majority is aching for a safe entry point back on the road to higher rates. That either happens Friday or some time in the few weeks thereafter. Combine that with the fact that we've moved about a half point lower from the beginning of the year, and cashing in those gains is hard to argue against"
Matthew Graham  :  "oh, this one was even better: Matthew Graham (1/31/14 8:58AM): I'll just say this: from the beginning of the more determined move higher in rate into the end of 2013, several of us have said a pronounced correction could target 2.55-2.60, and even 2.47 in an extreme case. Now that it's happening, let's not confuse the manufactured excuses for the move with "stuff that actually matters." Because again, there were plenty of disturbing factoids that should have helped us then, but didn't. So why do they magically matter now? (hint: because we need an excuse)"
Matthew Graham  :  "and the scary one: Matthew Graham (2/10/14 4:18PM): but I will say that if we hit 2.5 and bounce, it would be taken as that "epic positional reload" thing that I've mentioned a few times now--not a sign of ongoing strength. "
Matthew Graham  :  "scary because 2.56 may end up being the trigger for the reload. 2.50 or lower would have left no doubt."

Economic Calendar
Time Event Period Actual Forecast Prior
Thursday, Feb 13
8:30 Retail sales mm (%)* Jan 0.0 0.2
8:30 Initial Jobless Claims (k)* w/e 330 331
13:00 30-Yr Bond Auction (bl)* 16