17 to 9.  That's the current score between Treasuries and MBS in terms of day-over-day price gains.  Or look at it this way.  10yr yields just had their lowest 3pm close of the year at 2.426 vs 2.438 previously.  MBS, on the other hand, are heading out at 102-20 vs a previous high close of 103-08.  MBS have been bumping their heads on July's best levels while Treasuries are convincingly through theirs.

The most obvious reason for the underperformance is that the overall bond market rally is driven by geopolitics and European weakness--two things that have a much more direct effect on Treasuries vs MBS.  All that to say: yes, there was a pretty substantial rally today, and this is why MBS didn't get to participate as much.

To recap the actual events:

  • weak economic data in Europe overnight
  • technical buying in European bonds, selling in European stocks bred same in US markets
  • snowball buying in European bonds during US hours bred same in US markets
  • newswires saying Ukrainian fighter jet shot down on Eastern border fueled further flight-to-safety, further snow-ball buying just before noon.
  • (note: "snowball buying" generally means that buying is happening because of the buying that immediately preceded it.  For instance, if I am bet on 10yr yields moving higher from 2.47, and if I set an automatic line in the sand to cover that bet if rates fall to 2.44, and someone else does the same but sets their line in the sand at 2.43, as soon as rates hit my 2.44 'stop,' I'm forced to buy, further dropping rates and increasing the odds that the next guy in line is "stopped-out" as well.  And so on...)

The rally never really let up, largely because of this snowball phenomenon. 

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
98-30 : +0-12
FNMA 3.5
102-21 : +0-10
FNMA 4.0
105-25 : +0-08
2 YR
0.4320 : -0.0280
10 YR
2.4100 : -0.0640
30 YR
3.2190 : -0.0570
Pricing as of 8/7/14 4:38PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
3:11PM  :  Bond Markets Rolled up by Afternoon Snowball Buying (That's a Good Thing)
12:41PM  :  Treasuries at Best Levels Since Late May after Ukraine Headlines; MBS Lagging
9:24AM  :  Bond Markets Holding Just Inside Positive Territory After Data and Draghi

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
John Sheadel  :  "Agreed. Never like floating through to a Friday though. And the Ukraine issues continue to occur and then dissipate into nothing. "
Andy Pada, Jr.  :  "but it seems to me the effects of Ukraine and other geopolitical events seem to ebb and flow."
Victor Burek  :  "my only concern with floating would be stocks have pulled back a bunch in Europe and they could have a relief rally tomorrow which probably wouldn't help us"
Victor Burek  :  "looks like issues with Ukraine is driving this...that is not likely to be solved overnight"
John Sheadel  :  "You think this rally's going to hold through until tomorrow?"
Andy Pada, Jr.  :  "I want to believe..."
Jason Anker  :  "depends on the close today, if we close where we are now it's float boat time"
Victor Burek  :  "definitely wouldn't lock anything unless you get a reprice"
Nathan Miller  :  "if I get a rp better i will"
Victor Burek  :  "if I had one closing in less than 10, I would maybe"
Andy Pada, Jr.  :  "who is locking in?"