10yr yields fell 1.4bps today and Fannie 3.0s ended the day 3/32nds better in price.  Those stats could describe any bland, uneventful day for bond markets, but today was anything but.  The modest gains only end up describing today because that's where we happened to land after a rather wild ride.  Moreover, even if there had been no intraday volatility, it would still have been quite an accomplishment for bonds to make any gains given the headwinds.

In today's case, the headwinds were supply-related.  "Supply" refers to new bonds--things like Treasuries, MBS, and corporate debt being sold by sellers and bought by buyers.  There are a lot of sellers this week, and especially today, considering the biggest-ever corporate bond was launched ($46 billion in US dollars with additional tranches in other currencies).  That happened against the backdrop of a regularly-scheduled $21 bln 10yr Treasury auction.  Beyond that, there were plenty of other smaller corporate bonds hitting the market and regular amounts of other types of bonds being issued, but those were the biggies.

Normally, the big supply gluts hurt us.  Now we must consider that the weakness seen 2 days ago, in addition to this morning's initial weakness, could merely have been the market's way of bracing for this supply impact.  Bonds certainly improved after the 10yr auction, but they were already well on their way thanks to the worst day in  nearly 5 months for stock markets.  And therein lies the potential explanation.  The buzz regarding 2016 being the beginning of the next multi-year downtrend in stock markets is at an all-time high, and no amount of Fed tightening will keep money out of bonds if equities really start selling like they have the last 2 times the long term cycle turned a corner.

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
100-29 : +0-00
FNMA 3.5
103-25 : -0-01
FNMA 4.0
106-05 : +0-00
2 YR
0.9150 : +-0.0090
10 YR
2.0910 : +-0.0090
30 YR
2.8780 : +-0.0030
Pricing as of 1/13/16 5:40PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
4:43PM  :  ALERT ISSUED: Losing Some Ground After Hours
1:49PM  :  Bonds At Best Levels After Auction
10:52AM  :  Already Holding Ground, Bonds Get Modest Boost From Oil Data

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
John Rodgers  :  "Only thing I don't like about this market is history. Look at a 3m chart and close back on 12/1 then look at the next few weeks after. I'd feel better if we made a convincing move higher in price in the very near term. I know there are a lot of other factors besides historical trends but this one worries me."
Andrew Horowitz  :  "need to break through 2.08 first"
Hugh W. Page  :  "We need to get below 2 and stay there for a bit before I get all giddy about rates."
Victor Burek  :  "thinking this is a good sign for rates"
Matthew Graham  :  "If I was long equities, I'd be nervous. This is a LOT of long duration debt getting taken down without much fuss--into a rally even."
Matthew Graham  :  "Inbev deal launched just now, $46 bln for the US dollar portion"
Dustin McAlister  :  "so an A auction, probably means a flat rest of the day the way things have been going lately."
Matthew Graham  :  "RTRS - U.S. 9-YR 10-MO NOTES BID-TO-COVER RATIO 2.77, NON-COMP BIDS $19.47 MLN"
Matthew Graham  :  "RTRS - U.S. SELLS $21 BLN 9-YR 10-MO NOTES AT HIGH YIELD 2.090 PCT, AWARDS 36.29 PCT OF BIDS AT HIGH"
Matthew Graham  :  "If that last chat is confusing, here's the primer: Treasury Auction Jargon, Definition, and Significance "
Matthew Graham  :  "10yr Auction Preview: Bid-to-cover has been in a tight range from 2.58 to 2.7 over the last 4 auctions. 3 out of those 4 have come in a lower-than-expected yields (as measured by the auction's high yield vs the 1pm 'when-issued' yield, currently trading around 2.104"
Matthew Graham  :  "Another audio/video beta test from earlier. Adjusted some audio settings: http://screencast.com/t/40qC4kLt95Rd"