Bonds were weaker right from the start today as the overnight session saw several members of the European Central Bank comment on tapering prospects.  Granted, they're not calling it "tapering."  They're not even referring to any distinct event.  Rather, the discussion is about the general notion of "not buying bonds."  Whether they taper or quit cold turkey remains to be seen.  The important turning point will be when something about the current gameplan changes.  That's what today's speeches alluded to.

This is timely because next week brings the ECB announcement.  It was more of an issue today because two of the speakers referenced the market's expectations for the end of ECB bond buying. Moreover, both speakers went on to say that the market's expectations were well-founded.  In other words, it was a roundabout way of saying the bond buying program (and its mortality) is likely to be part of next week's discussion.

Even if that discussion doesn't result in any immediate changes (and it shouldn't, yet), it's not a topic that ECB President Mario Draghi has even been willing to discuss.  If that changes at next week's meeting, it's just another brick in the wall that separates financial markets from all that extra, guaranteed demand they've enjoyed.  All things being equal, that's not good for bonds.

I'll end by interviewing myself:

But wait!  Don't we already know the ECB is likely to end this thing in late 2018 or thereabouts? 

Indeed we do!

So why is this news

It's not news in the sense that we've learned something new.  Rather, it's news because the apparently concerted effort to brace markets for impact indicates that ECB officials might be concerned about delivering a message they think markets might not want to hear.  It's really just confirmation of a big gradual shift.  We all know it's coming eventually, but stuff like this just makes it more "real."  Or at least it makes it real sooner than some skeptics may have anticipated.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 4.0
101-19 : -0-07
10 YR
2.9736 : +0.0546
Pricing as of 6/6/18 5:31PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
11:38AM  :  ALERT ISSUED: Negative Reprice Risk Increasing
11:02AM  :  Treasuries at Weakest Levels; MBS Outperforming

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
John Tassios  :  "here is another reason why builders take advantage of customers. I have track home builder building a 500 basic 3 to 4 house plan type home community, 300k - 330 price range, and they are requiring buyer to order up front a plans / specs subject to appraisal PRIOR to them breaking ground to make sure value is there. builder only building 4 types of basic plans, builder's plans & Specs, builder is constructing, builder owns lot, builder will sell completed home to buyer at end of construction period. A subject to Appraisal will be 800 cost, and waste of time due to builder "requirement" to cost buyers even more money up front. so this tells me builder has no confidence their project of individual homes will appraise."
Brent Borcherding  :  "JT-- I just had a builder request that, as well. I thought it was a complete waste of time and client money, when the build wouldn't be complete for 6 months and we'd be starting over, again. No one else seemed to care."
jamie Fitz-Gerald  :  "hasn't the strategy for the past 5 months been to just lock?"