There's something that's just too fun about entertaining conspiracy theories--especially when it comes to the Fed's rhetorical platform.  Take for instance tomorrow's Minutes (the more detailed account of the meeting that took place in late July).  Bonds had been approaching the Minutes from a fairly neutral stance, and were certainly set to adjust to a more bullish (read: lower rates) stance after this morning's tepid economic data.

In other words, we were in the middle of the recent trading range yesterday and we were near the lower end of the recent trading range immediately following this morning's tame CPI numbers.  But mere minutes later and we had given up most of the gains.  A few hours later and we were well into the weakest territory in more than a week.  Why?

Today's weakness was all about the Fed.  Two Fed speakers hit the wires today--Dudley and Lockart--both highly regarded centrists (meaning that markets tend to pay more attention to these 2 guys because they aren't saying stupid, fringy crap most of the time, like a few other Fed members).  But today, they might have been mistaken for "the fringe."  In not so many words, they both said that "the economy is doing better than you think, yields are too low, we might hike soon, and we might hike twice.  Everything's great, just ask me!"

Bonds bought into the conspiracy theory that these two canaries were singing a different-than-normal tune specifically because they think tomorrow's Fed Minutes are going to have the same effect (of pushing rates higher).  Why would that matter?  Simply because the Fed has shown us, time and again in recent years, that they do not like market volatility, and will frequently attempt to delivery policy communications in such a way that minimizes volatility.  Bottom line, markets saw the 2 Fed speakers as softening the blow for tomorrow's minutes.  Maybe it's nothing, but it was good enough for a full reversal today.


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
103-16 : -0-03
Treasuries
10 YR
1.5750 : +0.0230
Pricing as of 8/16/16 3:47PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
12:37PM  :  ALERT ISSUED: Negative Reprices an Ongoing Possibility
9:26AM  :  ALERT ISSUED: Reprice Risk Increasing For Early Lenders
8:58AM  :  Dudley's Canary Bump Warning About Hawks (What's a Canary Bump?)
8:45AM  :  ALERT ISSUED: Weaker CPI Helps; Fed's Dudley Lays Smack Down, Sans Logic

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Ira Selwin  :  "SV - especially need to watch any non-conf arms that had prior approval when the index was lower. Their approval sheets do list max qual rate, but important to watch that it didnt go up later during the loan process."
Scott Valins  :  "anyone else seeing recent pop in LIBOR blow up a deal b/c underwriter uses the higher of qual rate and margin + LIBOR?"
Scott Valins  :  ""would be" should be "has been""
Jeff Anderson  :  "Hawks are in flight today."
Matthew Graham  :  "RTRS - LOCKHART SAYS U.S. JOB GAINS IN THE NEIGHBORHOOD OF 150,000 PER MONTH WOULD BE ENCOURAGING FOR ECONOMY"
Matthew Graham  :  "RTRS - LOCKHART SAYS HE COULD IMAGINE TWO AND POSSIBLY MORE RATE HIKES IN 2017 IF HIS OUTLOOK IS REALIZED"
Matthew Graham  :  "RTRS - LOCKHART SAYS NOT RULING OUT TWO RATE HIKES THIS YEAR"
Jeff Anderson  :  "We can cut and paste these comments into next years slot already. Same story. Another 18 mos, and then another...."
Sung Kim  :  "stop pussyfooting and raise rates"
Sung Kim  :  "basically - i don't matta what the data says, we interpret it how we want to"
Matthew Graham  :  "RTRS - ATLANTA FED'S LOCKHART SAYS NOT RULING OUT AT LEAST ONE INTEREST RATE INCREASE THIS YEAR, THOUGH NOT LOCKED INTO TIMING"
Matthew Graham  :  "RTRS - LOCKHART SAYS RECENT U.S. GDP DATA OVERSTATE WEAKNESS; ECONOMIC FUNDAMENTALS REMAIN STRONG AND PUT FED ON TRACK TO REACH INFLATION, EMPLOYMENT OBJECTIVES WITHIN 18 MONTHS"
Matthew Graham  :  "RTRS - LOCKHART SAYS RECENT WAGE PRESSURES SIGNAL ECONOMY MAY BE APPROACHING FULL EMPLOYMENT, INFLATION MOVING IN "HEALTHY" DIRECTION"