There were no market movers in play today.  I'm not trying to be funny or clever.  There were no market movers--at least not in the traditional sense where something happens and markets respond due to the implications of the thing that happened.

There were only compulsory trades and byproducts of those trades.  These are like the forces of nature when it comes to bond markets.  Whereas last week's CPI data and Fed Announcement were like giant wind machines clearly responsible for the breeze we were feeling, today's hurricane grew and evolved from weather that was already set in motion.  In other words, nothing about today caused the sell-off other than today was when it happened.

We saw the first evidence of a "tradeflow-motivated" sell-off at 8:20am.  There were no headlines or compelling events at 8:20am--just the CME open (the unofficial opening bell for Treasuries).  When traders show up for work with certain trades to make, and when those trades happen to be similar to one another, we tend to see evidence of that at 8:20am both in the form of volume and directionality.  True to form, volume spiked at 8:20am, and bond market weakness kicked into higher gear.

From there, the rest of the day was largely dominated by the reaction to that initial momentum.  We call it a reaction, but other traders could have easily had similar trades to make by the end of the year and simply pulled them forward to today based on what they saw.  In some cases, it was simply a computer program seeing a trigger level for more selling.  At a certain point in a sell-off, negative momentum becomes self-sustaining as everyone whose bluff can be called is forced to sell to avoid further losses.  At that point, weakness tends to run up to the next big line in the sand.  

There could have been no better example of this than today's highs coming in around 2.47% because that's the only other major technical ceiling we've discussed apart from 2.42% since late October.  The fact that 2.47% was hit so perfectly today only adds to the notion that this sell-off wasn't answering to anything but itself.  Granted, this can be exceptionally frustrating to consider on a day where the tax bill passed (sort of... now it looks like it goes back for a re-vote due to a technicality).  After all, if we have this big movement and this big "thing" happening in the form of tax bill, surely the big thing is the motivation for the movement, right?

But the last minute revelation that the House would have to re-vote ended up serving as the perfect piece of evidence.  Here we thought the Senate was minutes away from sending the bill to the President's desk and suddenly the House will have to come back to work tomorrow and do it all again.  If the tax bill passage deserved any credit as a market mover today, you can bet we would have seen at least some small blip when that news hit.  But there was nothing.

Bottom line: markets traded taxes in grand fashion throughout 2017, and especially in the past 3 months.  There were days where the tax bill absolutely drove markets above all else.  Today was not one of those days.


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 3.5
102-11 : -0-11
Treasuries
10 YR
2.4590 : +0.0670
Pricing as of 12/19/17 5:24PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
1:17PM  :  ALERT ISSUED: If You Haven't Seen a Reprice Yet, You Probably Will
10:55AM  :  ALERT ISSUED: Negative Reprices Becoming Likely For Some Lenders
10:27AM  :  ALERT ISSUED: Negative Reprice Risk Increasing
8:48AM  :  Weakness Quickly Extending at Domestic Open

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
aaron meyer  :  "MG excellent Huddle as usual, thanks for talking me off the ledge"
DIRK POSTUPACK  :  "MG thanks for that alert earlier. I decided to lock up the loans that I could and it worked out well. Clients would be paying now if I wouldn't have locked at that time. Thanks again!!!!"
Andy Pada, Jr.  :  "well that is awesome!"
Matthew Graham  :  "nvm, cleared it up. Page 78: "Special rules apply in the case of indebtedness from refinancing existing acquisition indebtedness. Specifically, the $1,000,000 ($500,000 in the case of married taxpayers filing separately) limitation continues to apply to any indebtedness incurred on or after December 15, 2017, to refinance qualified residence indebtedness incurred before that date to the extent the amount of the indebtedness resulting from the refinancing does not exceed the amount of the refinanced indebtedness. Thus, the maximum dollar amount that may be treated as principal residence acquisition indebtedness will not decrease by reason of a refinancing.""
Sergio Szyrko  :  "I know this gets technical, but I wonder if one has a 1,000,000 (+) purchase money mortgage, then after the bill, decides to do a r/t refi on that amount. will then cap on the new mortgage then be 750,000?"
Dominick Cordone  :  "sure hope 2.47 holds...."
Ted Rood  :  "shout out to MG and the site, I locked a floating loan 3 minutes before our worsen."
Matthew Graham  :  "technicals are more important. The break above 2.42 implied a move to 2.47. Looks like we're seeing it."
Rob Downs  :  "So are technicals less important when we've got snowball trading going on? I assume our new floors are soft given there's little substance behind this move."
Curt Sandfort  :  "Thanks again MG for keeping us informed ahead of the reprices, informed of the "range", and making us all look smarter than the average LO!"