Things have been bright and sunny for the bond market without any troubling exceptions since mid-April.  During that time we've only seen 10yr yields rise more than 6bps (close-to-close) 3 times.  Today was one of them.  We could say something like "the sun also sets," but that would be ignoring the fact that yields hit their lowest closing levels since Nov 2016 yesterday.  And as it happens, the other 2 days with 6bps+ losses also followed strong trading days near long-term low yields.

So the worst thing we can say for now is that the sun went behind a cloud.  If things remain dark tomorrow, we'll ratchet up the level of concern accordingly.

As far as underlying motivations for the weakness, there's no doubt that US/China trade headlines moved the needle in the overnight session.  We can also infer some bias toward weakness by the absence of a decent rally following the much-lower-than-expected durable goods data.  But if trade headlines were the biggest consideration, we should have seen a more meaningful bounce back into positive territory after the overnight headlines were debunked (for the record, they initially said a trade deal was 90% complete without being clear about the fact that the source of that comment was speaking in the past tense about how negotiations were shaping up before the last time they fell apart).

The persistence behind the bond market weakness suggests technical momentum is in play as well.  Rates look like they're consolidating inside the range set on Fed Day last week (we have yet to move outside those yields).  Yesterday saw yields very close to those lows, so today makes sense as a technical bounce.


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
100-21 : -0-09
Treasuries
10 YR
2.0500 : +0.0580
Pricing as of 6/26/19 5:21PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
2:47PM  :  ALERT ISSUED: Negative Reprices Becoming More Likely
1:09PM  :  Temporary Pressure After Slightly Weak 5yr Note Auction
10:35AM  :  ALERT ISSUED: Negative Reprice Risk Increasing
9:09AM  :  Slightly Stronger After CME Open and Durable Goods

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Ira Selwin  :  "The other point on that is this - The Blue Water bill initially sought to raise the funding fee on VA loans to pay for the proposed extension of VA health benefits to former Navy personnel who served on ships off the coast of Vietnam. However, housing and industry trade groups and veterans organizations lobbied against the proposed increase. They argued that VA loan guarantee fees should be based on the risk of the loan made, not the costs of other VA programs or benefits. So, as a way to generate additional revenue, policymakers decided to eliminate the loan cap."
Ira Selwin  :  "I wouldnt think so OO - that piece is a GNMA issue - they just define it as anything above that limit"
Timothy Baron  :  "That's what I'm thinking, KR."
Oliver Orlicki  :  "Wonder if lenders will no longer consider high balance"
Oliver Orlicki  :  "No more cap on VA loans over county loan limits"
Matthew Graham  :  "seems fair"
Oliver Orlicki  :  "B-"
Matthew Graham  :  "RTRS - HIGH YIELD AT LATEST 5-YEAR NOTE SALE WAS LESS THAN 1 BASIS POINT ABOVE ITS 1 P.M. WHEN-ISSUED LEVEL - REUTERS DATA"
Matthew Graham  :  "RTRS - U.S. SELLS $41 BLN 5-YEAR NOTES AT HIGH YIELD 1.791 PCT, AWARDS 88.23 PCT OF BIDS AT HIGH"

Economic Calendar
Time Event Period Actual Forecast Prior
Wednesday, Jun 26
7:00 MBA Purchase Index w/e 266.3 268.6
7:00 Mortgage Refinance Index w/e 1949.5 1888.8
8:30 Nondefense ex-air (%)* May 0.4 0.1 -1.0
8:30 Durable goods (%)* May -1.3 -0.1 -2.1
13:00 5-Yr Note Auction (bl)* 41