Remember the "QE-on vs QE-off" trading in 2013?  In an extremely overt way, stocks and bonds rallied and sold together based on constantly evolving prospects for Fed tapering.  It occurred perfectly between the Fed meeting that introduced tapering possibilities and the Fed meeting that confirmed it.

2015-5-19 QE on vs QE off

While it hasn't been on the same scale, we do see echoes of this same type of trading from time to time.  These are especially evident when the ECB or Fed are on the near-term calendar or if an official is making a comment that seems to affect ECB/Fed accommodation prospects.

That's exactly what happened overnight tonight when ECB's Couere said they may 'front-load' bond buying ahead of a less liquid summer trading season.  Stocks and bonds both improved on the news, but especially German bonds. 

US markets would have their own "accommodation trade" (or in this case a "contraction trade") as Housing Starts data unequivocally suggested the "weak winter."  The data crushed forecasts--especially in the northeast--and hit the best levels since late 2007. 

All this a day before we get FOMC Minutes and 3 days before Yellen gives a speech on her economic outlook.  The implication is that either the Fed will give a clue or markets will be more likely to interpret what's said as justification for an earlier rate hike.

2015-5-19 accommodation trade

For what it's worth, the general malaise in Treasuries, specifically, is highly attributable to a much bigger-than-expected slate of corporate bond issuance. 


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
100-17 : -0-08
FNMA 3.5
103-28 : -0-06
FNMA 4.0
106-14 : -0-04
Treasuries
2 YR
0.6130 : +0.0360
10 YR
2.2730 : +0.0390
30 YR
3.0550 : +0.0260
Pricing as of 5/19/15 1:21PMEST

Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
9:28AM  :  ALERT ISSUED: Negative Reprice Risk Already Possible in Some Cases
8:48AM  :  Bond Markets Back in the Red after Huge Housing Starts Beat

Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Victor Burek  :  "at top of screen, there is a help button, under it read the knowledge base...tons of great info"
Matt Hodges  :  "use on topic to post scenarios that stump you, but not ones you could easily google/look up on Fannie/Freddie/FHA/VA. you will have multiple LOs offering their guidance on the former"
Matt Hodges  :  "learn all you can about the site's features and don't ask if you should lock"
Daniel Munoz  :  "Any particular advise you veterans of this site can offer, maybe something you "wish" someone would have told you the first day you joined about the site? "
Bill Hills  :  "DM ... best resource available... nothing compares... welcome"
Oliver Orlicki  :  "Best thing you have done for your business in years"
Daniel Munoz  :  "Good Morning, just started my free trial"
Matthew Graham  :  "RC, above 2.28-ish, we have to be much more concerned about another installment of big selling pressure, though I'd like to think that would require confirmation from rate hike clues in tomorrow's FOMC Minutes."
Rich Cordova  :  "So are we still considering this consolidation with the upward trend still intact or is there beginning to be real concern that here we go on another slide down."
Matthew Graham  :  "any huge beats/misses will matter, and of course, any data that supports the underlying tradeflow bias will matter. If there's an underlying tradeflow bias and the data only weakly points in the other direction, then yes... there's a good chance it will look like it doesn't matter."
Steve Chizmadia  :  "so I guess the only data that doesn't matter is the bad data??? "
Matthew Graham  :  "RTRS - US APRIL HOUSING PERMITS 1.143 MLN UNIT RATE (CONSENSUS 1.060 MLN) VS MARCH 1.038 MLN UNIT RATE (PREV 1.042 MLN)"
Matthew Graham  :  "not going to help"
Matthew Graham  :  "RTRS- US APRIL HOUSING STARTS 1.135 MLN UNIT RATE (CONSENSUS 1.019 MLN) VS MARCH 0.944 MLN UNIT RATE (PREV 0.926 MLN)"
Matthew Graham  :  "RTRS- US APRIL HOUSING STARTS +20.2 PCT VS MARCH +4.9 PCT (PREV +2.0 PCT)"
Matthew Graham  :  "And welcome DM. Feel free to email me personally if you want to discuss the site. Same goes for any member old or new. If there comes a time where I can't get back to everyone, I'll let you know, or we'll fire up another group webinar."