Relative to yesterday's exceptionally linear trading, prices have been much more volatile today.  The overnight session was constructive for global bond markets with soft UK inflation data benefiting European and US bond markets. 

MBS opened 5 ticks higher and added to the gains ahead of the morning's economic data.  The Consumer Price Index was right on target, but Housing Starts were significantly stronger than expected.  Markets only managed a brief reaction that say bond markets lose most of the morning gains before getting right back to the best levels.

From there, however, it's been a fairly quick, and fairly lopsided slide to new lows (or 'highs' in the case of Treasuries).  Light trader participation and volume makes for a situation where big trades are having an outsized effect.  In other words, we've had a few big Treasury trades, and because they comprise a bigger chunk of the day's trading than they would during more active days, they generate more momentum. 

That technical explanation isn't even really necessary if we simply go back to the geopolitical nature of last week's rally and then consider that there are some geopolitically 'hopeful' headlines that came out around the same time that bond markets changed course.  The fact that the morning's Housing data agrees with the weakness in bonds is just icing on the cake.  It doesn't taste good, but there it is.

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
98-26 : -0-03
FNMA 3.5
102-15 : -0-02
FNMA 4.0
105-19 : -0-01
2 YR
0.4230 : +0.0040
10 YR
2.4020 : +0.0150
30 YR
3.2180 : +0.0220
Pricing as of 8/19/14 12:32PMEST

Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
11:33AM  :  ALERT ISSUED: Weak Fed Buyback and More Big Trades Adding up to More Reprice Risk
10:59AM  :  ALERT ISSUED: Negative Reprices Move from Possible to Probable
10:32AM  :  Behind the Recent Weakness: Ukraine Headline and a Block Trade
10:03AM  :  ALERT ISSUED: Negative Reprice Risk Already Increasing
8:53AM  :  Bond Markets Shed Gains, Then Bounce Back Following Stronger Housing Data

Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Victor Burek  :  "that explains the home builder sentiment"
Matthew Graham  :  "RTRS- US JULY HOUSING STARTS 1,093,000 UNIT RATE (CONSENSUS 969,000) VS JUNE 945,000 UNITS (PREV 893,000 UNITS"
Matthew Graham  :  "RTRS- US JULY HOUSING STARTS +15.7 PCT VS JUNE -4.0 PCT (PREV -9.3 PCT)"
Matthew Graham  :  "RTRS- U.S. JULY CPI YEAR-OVER-YEAR +2.0 PCT (CONS +2.0 PCT), EXFOOD/ENERGY +1.9 PCT (CONS +1.9 PCT)"
Matthew Graham  :  "RTRS - U.S. JULY CPI +0.1 PCT (+0.0909; CONSENSUS +0.1 PCT), EXFOOD/ENERGY +0.1 PCT (+0.0958; CONS +0.2 PCT)"
Victor Burek  :  "especially with oil prices falling"
John Tassios  :  "it will start falling here too, quite a bit in coming months"
John Tassios  :  "inflation falling all over the world's industrialized economies"