It's been a strange week for domestic bond markets so far.  Just 2 short days ago, bonds were rallying with a seeming disregard for negative cues from related markets and data.  Now, as of yesterday, the opposite is true as sellers are clearly in control despite what would normally be positive external cues (lower stocks, stable European bond markets, and yesterday's horrible econ data).

While this morning's Jobless Claims data was slightly stronger than expected, it was already made clear yesterday that bonds aren't trading data at the moment.  Claims data was no exception as there was no detectable trading reaction in the first 10 minutes.  Bond traders simply don't sit on their hands and "think it over" for that long.  10 seconds would be a long time.  10 minutes is out of the question.

So we're left with yet another vote for a 'tradeflow-driven' sell-off.  This refers to market participants making trading decisions based on how other market participants are trading.  For example, a big seller might motivate other sellers.  We've had a few today.  Most notably, the day's selling began in earnest after a very large 5yr futures seller dumped shares around 6:30am.  

Negative tradeflow pressure can even be as simple as an absence of buyers.  In this case, that's very much a factor, and it's one of the reasons we discussed the need for 'confirmation' after breaking through the 1.90 technical floor on Tuesday.  Those sorts of breaks can either be the first step toward additional gains or the final cue for sellers to step back in and bet on a bounce.  In turn, this quickly saps buying demand as the initially small rise in rates forces buyers to book profits and look for a new entry point.

We can only hope that each new plateau will turn out to be that re-entry point.  The recent movement suggests not getting our hopes up though.  Plateaus over the past 2 days have quickly given way to more selling.  The trading activity that follows this afternoon's 7yr auction will probably offer the clearest picture of how the momentum is progressing.  I'm not as interested in the auction result itself as I am in the week's cycle simply being over.  This will let us know how much anxiety that had been causing.  Hopefully it was "a lot."


MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
FNMA 3.0
101-30 : -0-06
FNMA 3.5
104-24 : -0-05
FNMA 4.0
106-21 : -0-03
Treasuries
2 YR
0.6180 : +0.0120
10 YR
1.9750 : +0.0480
30 YR
2.5640 : +0.0570
Pricing as of 3/26/15 11:59AMEST

Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
10:03AM  :  ALERT ISSUED: Sell-Off Pace Quickens; Reprice Risk Increases for Some Lenders
9:19AM  :  ALERT ISSUED: Bond Markets Continue Yesterday's Weaker Trend; Reprice Risk Considerations

Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Adam Dahill  :  "Feel awesome to be totally locked up!!"
Mike Drews  :  "the moves up are always so fast"
Victor Burek  :  "very disappointing considering we were at 1.89 jjust a few hours ago"
Matthew Graham  :  "but they're not unified in that. There's a tendency to think of them like a sports team running plays called by Yellen. I have to remind myself at times that they're individuals making their own choices. There's no team strategy there."
John Tassios  :  "To me, looks like the FED speakers trying jawbone rate hikes in 2015 to prepare markets as opposed to actually pulling the trigger. In other words, I wonder if FED is trying to " FED Talk" the bond markets into doing the rate hike tightening for them in the markets, to give them more time to wait on their end. So far though, the markets pretty sanguine to the FED speak. "
Matthew Graham  :  "RTRS - US JOBLESS CLAIMS FELL TO 282,000 MARCH 21 WEEK (CONSENSUS 290,000) FROM 291,000 PRIOR WEEK (PREVIOUS 291,000)"
Matthew Graham  :  "RTRS- LOCKHART SAYS WANT TO SEE CONTINUED UNEMPLOYMENT DROP BEFORE RAISING RATES"
Matthew Graham  :  "RTRS- LOCKHART REPEATS THAT FED MEETINGS BEGINNING IN JUNE WILL BE "LIVE" FOR POSSIBLE RATE HIKE"