Core European debt markets set the tone for the overnight session.  That means German Bunds big rally helped US Treasury yields move lower overnight.  One of the key root causes for today's move is the same sort of EU contagion that was so prevalent back in 2012.  That dynamic saw peripheral countries' borrowing costs spiral higher, and the systemic consequences for the Euro currency fueled flights to the relative safety of "core" countries' sovereign debt--Germany being the benchmark.

This time around, the drama is relatively minor compared to the show put on by Greece 2, 3, and 4 years ago.  It concerns a Portuguese bank this time, and in the grand scheme of things, hasn't even come close to moving Portuguese sovereign debt yields as much as they moved in mere sympathy to Greece 2 years ago.  In fact, Portugal's 10yr is trading around 4% these days compared to 2012 when it moved from 17% to 7% through the course of the year.

It was enough for some overnight drama though.  The biggest consideration for US markets was Germany's run toward all-time lows.  They won't get there today, but at 1.17 vs an all-time closing low of 1.16, they got close.  That was around 7am, and yields have been trending higher ever since, albeit slightly.

Treasuries managed one more dip after the domestic open, but then joined in the gradual weakening that continues even now.  Day over day, both MBS and Treasuries are still in positive territory, but only with about half their original gains.

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
98-18 : +0-05
FNMA 3.5
102-18 : +0-05
FNMA 4.0
105-25 : +0-03
2 YR
0.4601 : -0.0399
10 YR
2.5268 : -0.0182
30 YR
3.3590 : -0.0010
Pricing as of 7/10/14 12:26PMEST

Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
11:38AM  :  ALERT ISSUED: MBS at Lows of the Day; Negative Reprice Risk on Horizon
9:08AM  :  Jobless Claims Schmobless Claims. Portugal Moving Bond Markets... Wait, What?

Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
aaron meyer  :  "pricing has improved nicely this morning, about 30 bps "
Matthew Graham  :  "RTRS- US JOBLESS CLAIMS FELL TO 304,000 JULY 5 WEEK (CONSENSUS 315,000) FROM 315,000 PRIOR WEEK (PREVIOUS 315,000)"
Christopher Stevens  :  "This could be helping bonds move lower today: Worries over the financial health of a major Portuguese lender sent a wave of panic though the continent's markets, drubbing shares in Southern Europe and prompting companies to pull stock and bond offerings. Shares in Banco Espírito Santo have been under pressure since accounting irregularities emerged in its holding companies in late May. But the declines mounted drastically after investors learned that parent company Espírito Santo International had delayed coupon payments relating to some short-term debt securities. Stocks in BES's controlling shareholder Espirito Santo Financial Group were suspended."
John Sheadel  :  "Think I've seen 85% here and there. "
Tom Sawyer  :  "Anyone starting to see less than 20% investment purchases more readily available?"