The day began with MBS and Treasuries in weaker territory after an uneventful overnight session.  There wasn't much to the weakness and it only made for a few bps higher in 10's and 3-5 ticks lower in MBS. 

From there, geopolitical risk headlines surrounding Russia helped fuel a Treasury bid and stock selling.  The fact that these hit just before the stock market open made for an even quicker move.  10's rocketed from 2.72 to 2.68 in short order and MBS surged well into positive territory.

Finally, a much-stronger-than-expected New Home Sales release put an end to the bull run in bonds.  There can be a lot of debate about the standard error on this report, but keep in mind that New Home Sales have seen the least bounce back compared to all the other main housing metrics.  In that sense, big beats like this merely serve to close some of that gap. 

Additionally, the data showed the biggest gains in the Northeast, which was the same conclusion from the recent New Residential Construction report.  Can these big misses/beats be substantially revised?  Of course, but it's never as much as the standard error suggests, and last month was revised higher (to 427k from 414k).  Point being: a big standard error in the report isn't automatic justification to disregard the numbers as frivolous.  It might make you feel better about markets moving against you, but ultimately if trading levels imply markets aren't disregarding the data, that's all that matters.

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
96-27 : -0-02
FNMA 3.5
101-03 : -0-01
FNMA 4.0
104-17 : +0-01
2 YR
0.3402 : -0.0068
10 YR
2.7032 : +0.0022
30 YR
3.6577 : -0.0033
Pricing as of 2/26/14 12:38PMEST

Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
11:33AM  :  ALERT ISSUED: Uneven Negative Reprice Risk Heavily Dependent on Lender
10:30AM  :  Almost Comically-Better-Than-Expected Home Sales put Crimp in Rally
9:39AM  :  After Losing Ground Overnight, Bond Markets Bounce Back

Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Scott Valins  :  "surprised how weak those mortgage indexes are"
Christopher Stevens  :  "that nonprofit article in the News Stream is interesting. BofA gives a non-profit housing corp $10bill in funding to basically make subprime loans. "
Jason Anker  :  "CS - I've lost loans to them a few times"
Victor Burek  :  "take away the housing crash. and new home sales are only back to 1990 levels"
Victor Burek  :  "see that on the chart in MG's morning update"
Sung Kim  :  "also kind of implies that we are bouncing around in a recession still since the other bottoms seem to coincide with recessionary periods"
blarney27  :  "gm all....those refinance and purchase index numbers look really bad. Anyone still thinking this country can go back to 5% plus rates (with current income and home values) is dreaming. "
Matthew Graham  :  "RTRS- US JAN SINGLE-FAMILY HOME SALES 468,000 UNIT ANN. RATE, HIGHEST SINCE JULY 2008 (CONS 400,000) VS DEC 427,000 UNIT RATE (PREV 414,000)"
Jason Anker  :  "umm sorry but no one here is seeing that at all"
Sung Kim  :  "these numbers are bogus, no way"
Christopher Stevens  :  "and mortgage applications are at 20YR lows"
Sung Kim  :  "mortgage apps way off and new home sales way up"
Corey Leonard  :  "as usual, the data all doesn't meld together properly"
Victor Burek  :  "but still 468k, is still a horrible number"
Michael Gillani  :  "So MG, if this housing data is statistically insignificant with that monster variance, then how are the markets reacting to it?"
Matthew Graham  :  "The big +- variance makes for a scandalous headline, but it doesn't make the data insignificant. We see stuff like that, and our minds think "oh, it could really be 20% in the other direction!" With cognitive bias jumping to the conclusion that it must be distorted in a positive direction. But the Census Bureau is really reporting that it could be off 20% in EITHER direction. Look at the chart in the update. Maybe New Sales have some catching up to do? "
Jeff Anderson  :  "Interesting piece of the 11:01 New Stream article about Chase cutting 22 of its 37 mortgage products. More cheese pizza and vanilla ice cream."