• European stock weakness/bond strength ruled the day
  • Treasuries, stocks, oil, all followed Europe until Europe closed, then went their own ways
  • German Bunds on brink of all-time lows
  • Domestic stocks still stuck in long-term reversal pattern
  • Oil still well under $40
  • All roads lead to bonds

The sun never sets on the bond market empire.  If it's not oil prices, stocks, or Fed policy helping Treasuries and MBS, it's European market panic and ECB meeting minutes.  Everywhere we look, we can find another reason for bonds to be doing well, and bond traders definitely agree.

The overnight session began with a strong move in currencies that put domestic markets on the defensive.  In fact, the Yen is in the midst of a wholesale reversal of its late 2014 spike (where "spike" = weakness) as the Bank of Japan is seen as having reached at least a temporary limit in its ability to weaken the currency.

The "risk-off" flames were fueled by European bank stock weakness later in the overnight session, which was complimented by European bond market strength.  All of the above spilled over to Treasuries as investors sought safe havens for cash.  10yr yields and MBS began the domestic session near yesterday's best levels and never looked back.  Stocks fell early and often, doing much to contribute to the bigger "risk-off" trading theme.

Stocks fell early and often, doing much to contribute to the bigger "risk-off" trading theme.  In fact, S&P's completely erased yesterday's strong move, forming one of the few candlestick patterns worth talking about (bearish engulfing pattern).  The fact that this is occurring right at a time where it already looks like stocks were fizzling, AND right when corporations enter a blackout period on corporate buybacks, AND right at the beginning of earnings season, AND right as central banks are reminding us that they're still pretty darn concerned about the fragility of the global economy... well, it's not good for stocks and it's very good for bonds.


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
102-29 : +0-09
Treasuries
10 YR
1.6870 : -0.0660
Pricing as of 4/7/16 5:28PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
10:04AM  :  ECB Minutes Helping Bonds Recover

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Sung Kim  :  "a result rather"
Sung Kim  :  "rates tend to be an effect"
aaron meyer  :  "MG is Pre-pays published anywhere?"
Matthew Graham  :  "I wouldn't lie to you and I would tell you if I had any doubts, but i have none: higher rates in the 80's is not responsible for the ensuing economic growth."
Matthew Graham  :  "I'm pretty sure it was the technological revolution and expansion of foreign trade. Something about the internet too."
aaron meyer  :  "did it? Or was it something else?"
Andrew Haynes  :  "but...pre 1980 when rates were a bit lower, that period where 10 year was in the double digits...that brought on future economic expansions for a couple decades."
Matthew Graham  :  "yeah AH, my point is that if we're talking about 10yr and mortgage rates, they're going to be what they're going to be based on the economy, inflation, and currency wars. The badness or goodness will already be evident and those longer term rates will simply be moving to reflect it."
Andrew Haynes  :  "I agree...I think we are at the point of no return"
Matthew Graham  :  "Yeah, but I might be a bit more pessimistic than you when it comes to changes in rates accomplishing any good. I think we're screwed either way."
Andrew Haynes  :  "just going back to my initial statement though...lower rates wont help us in the long run"