Is this the "big one" or isn't it?!  That's what everyone with a vested interested in the stock market would like to know about the ongoing sell-off that's been in play during the fourth quarter of 2018.  The record highs at the end of September created a high.  These concerns ramped up significantly in the middle of December when stocks broke through their shorter-term resistance levels.

It may still be the case that December was just the tip of the iceberg for a much bigger downturn in stocks, but there's an equally good case to be made for a big bounce back in January.  Investors seem to have been betting on both sides of that debate this week with a few big losses followed by a few big bounces.  In each case, bonds are being brought along for the ride.

Bonds' involvement was more unpleasant yesterday as bond investors feared the big stock bounce might be in the works.  But today's overnight session brought more stock weakness and an almost full recovery for bonds.  The relatively strong 7-yr Treasury auction helped yields get all the way back to yesterday's lows by 2pm today.  Then stocks launched skyward at a frantic pace, easily erasing every last bit of overnight weakness. 

Bond yields spiked in response, but MBS didn't lose as much ground as Treasuries on a relative basis (nor had they gained as much in the first half of the day.  As such, there wasn't much cause for negative reprice risk, but there was yet another reminder that the broader market is on edge, and the next true wave of decisive momentum is likely to carry rates with it, for better or worse.


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 4.0
101-20 : +0-06
Treasuries
10 YR
2.7740 : -0.0230
Pricing as of 12/27/18 5:15PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
3:50PM  :  ALERT ISSUED: Bonds at Weakest Levels, But Reprices Aren't a Given
8:46AM  :  Stronger Overnight and Holding Ground So Far

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "It's lighter than other times of the year, for sure, but higher than some past Decembers. The thing that makes it hard is the presence of "important stuff" in several recent Decembers (fed moves, tax bill, first rate hike, ecb qe developments, presidential election )"
Matthew Graham  :  "There really isn't a "normal" to compare to for this time of year."
Chris Pater  :  "we're grinding towards 2.71 / 2.72 - MG is light volume a contributor or do we have higher than usual holiday volumes?"
Matthew Graham  :  "yield expectation was 2.69, and bid-to-cover was 2.5-ish. either grade works"
John Tassios  :  "i would say A - considering no concessions going into it"
Oliver Orlicki  :  "b+"
Matthew Graham  :  "RTRS - HIGH YIELD AT LATEST 7-YEAR NOTE SALE WAS MORE THAN 1 BASIS POINT BELOW ITS 1 P.M. WHEN-ISSUED LEVEL - REUTERS DATA"
Matthew Graham  :  "RTRS - U.S. 7-YEAR NOTES BID-TO-COVER RATIO 2.46, NON-COMP BIDS $11.83 MLN"
Matthew Graham  :  "RTRS - U.S. SELLS $32 BLN 7-YEAR NOTES AT HIGH YIELD 2.680 PCT, AWARDS 27.75 PCT OF BIDS AT HIGH"

Economic Calendar
Time Event Period Actual Forecast Prior
Thursday, Dec 27
8:30 Jobless Claims (k) w/e 216 217 214
8:30 Continued jobless claims (ml) w/e 1.701 1.665 1.688
9:00 Monthly Home Price mm (%) Oct 0.3 0.2
9:00 Monthly Home Price yy (%) Oct +5.7 6.0
13:00 7-Yr Note Auction (bl)* 32
Friday, Dec 28
9:45 Chicago PMI * Dec 62.0 66.4
10:00 Pending Sales Index Nov 102.1
10:00 Pending Home Sales (%) Nov 0.7 -2.6
10:00 New home sales chg mm (%)* Nov 2.9 -8.9
10:00 New home sales-units mm (ml)* Nov 0.560 0.544