One theme dominated the day: changing of the guard between June/Q1 trading and July/Q2.  Out with the old, in with the slightly less old, but not fundamentally too different, as they say.

If you've been tuned in to almost any recent MBS Commentary entry, this is the same old dynamic we've been considering (i.e. month/quarter-end trading considerations).  Today was simply the day that the hypothesis had a chance to be tested. 

Sure enough, bond markets saw moderate but pervasive pressure all day long in the same relative distribution that characterized the strength heading into the end of June ('distribution' refers to the parts of the yield curve moving the most, in this case, the longer-dated maturities rallied more yesterday and sold more today).

When these bigger picture trading considerations are about, they run a serious risk of overshadowing the economic data.  A roughly as-expected reading on ISM Manufacturing was no match for the tradeflow steamroller.  OK, steamroller implies more momentum than we can safely assume given that vacation-week trading apathy is making for extra light participation.  That doesn't make current levels irrelevant, but it does mean that any big reaction to Thursday's glut of data will certainly be enough to overcome the "housekeeping" trading we saw today.

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
98-10 : -0-11
FNMA 3.5
102-16 : -0-10
FNMA 4.0
105-25 : -0-07
2 YR
0.4685 : +0.0115
10 YR
2.5665 : +0.0505
30 YR
3.3991 : +0.0601
Pricing as of 7/1/14 4:46PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
3:32PM  :  ALERT ISSUED: Lingering Negative Reprice Risk
1:31PM  :  ALERT ISSUED: MBS Close to Breaking Lows; Reprice Risk Considering Paying a Visit
1:23PM  :  IMPORTANT: New Version of MBS Live
10:23AM  :  Tame ISM Data Makes for Short-Lived Bond Market Strength, Hard-Fought Gains
9:31AM  :  ALERT ISSUED: Bond Markets Under Pressure as New Quarter Begins

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Sung Kim  :  "i would lock before the RP, we always ramp in to NFP, at least that is how it has been for the past 6 months"
Caroline Roy  :  "i've got some at about 40bps. I was kind of asleep at the wheel on a couple locks yesterday i guess....hmm. now what?"
Victor Burek  :  "around there...but that shouldn't surprise you, they always take away much more than mbs price justifies"
Sung Kim  :  "8/32 = 25bps"
John Paul Mulchay  :  "about 30bps"
Caroline Roy  :  "are you guys seeing pricing .375% worse today? doesn't that seem a bit much?"
Victor Burek  :  "dow only 5 points from 17000!"