MBS Live: MBS Afternoon Market Summary
Today's DOMESTIC data-driven rally has definitely looked the part of "endangered species" over the past few years and especially in the past two weeks. It's not like domestic data hasn't been a market mover, and it's not like the European session hasn't seen its fair share of uninspired sessions, but today was a different breed. To say that the European session was flat would be an understatement. It flat-out failed to motivate any significant movement in US Treasuries. Viewed in conjunction with the rest of the trading day in the US, it's abundantly clear that markets pounced relentlessly on the ADP payrolls data as the one, single turning point against the preceding flatness. The facts that stocks opened weaker and that ISM Services data printed weaker merely helped keep the snowball in motion. By the time the rally ran it's course, 10's hit the high 1.7's and Fannie 3.0 MBS topped out at 103-19.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
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Afternoon Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts and updates issued via email and text alert to MBS Live subscribers this afternoon.
2:11PM :
ALERT ISSUED:
10yr Yields Hit 2013 Lows After N. Korea Headline, MBS Follow
RTRS-U.S. DEFENSE SECRETARY HAGEL CITES "REAL AND CLEAR" DANGER FROM NORTH KOREA, U.S. WORKING WITH CHINA, OTHERS TO DEFUSE TENSIONS
Treasuries surged on this news, not at their highest volumes or fastest pace of the day, but in a clearly correlated fashion. The move brings 10yr yields to their lowest levels of 2013. We've seen a few breaks into the high 1.79's so far and are currently at 1.8055.
It's too much to ask of MBS to keep pace with an 18 tick price rally in 10's, but the fact that we have 11 ticks in the green is fairly acceptable, and keeps us from breaking above recent limits in terms of yield spread vs Treasuries. That 11 tick gain puts Fannie 3.0s at 103-17. At this point some lenders may just be waiting for the gains to level off before repricing, though we did see a few after the last alert.
At the risk of implying that today's rally is primarily due to North Korea news, we'd emphatically say that "it's not." The news wire helped a process that was already in the works, but by now means created it. Europe fears... range exploration in bond markets... Treasuries getting caught up with Bunds... Signs of a broader shift in asset-allocation trade... 3 central banks report tomorrow... 2 reports today adding major negative anecdotes to Friday's NFP picture... All of these things are creating a quick move to play defense against the possibility that markets continue making broader shifts fueled by lackluster risk cues from tomorrow's central banks and most importantly against the possibility of a big NFP miss.
This could quickly bounce back the other way, or it could mark a shift that results in a test of the long term uptrend in yields--a battle that would be fought around 1.75% in 10yr Treasuries. Either way, it seems to present a good opportunity to take risk off the table ahead of big-ticket events, especially if you see one of the positive reprices that should be on the way (if you haven't seen one already).
Treasuries surged on this news, not at their highest volumes or fastest pace of the day, but in a clearly correlated fashion. The move brings 10yr yields to their lowest levels of 2013. We've seen a few breaks into the high 1.79's so far and are currently at 1.8055.
It's too much to ask of MBS to keep pace with an 18 tick price rally in 10's, but the fact that we have 11 ticks in the green is fairly acceptable, and keeps us from breaking above recent limits in terms of yield spread vs Treasuries. That 11 tick gain puts Fannie 3.0s at 103-17. At this point some lenders may just be waiting for the gains to level off before repricing, though we did see a few after the last alert.
At the risk of implying that today's rally is primarily due to North Korea news, we'd emphatically say that "it's not." The news wire helped a process that was already in the works, but by now means created it. Europe fears... range exploration in bond markets... Treasuries getting caught up with Bunds... Signs of a broader shift in asset-allocation trade... 3 central banks report tomorrow... 2 reports today adding major negative anecdotes to Friday's NFP picture... All of these things are creating a quick move to play defense against the possibility that markets continue making broader shifts fueled by lackluster risk cues from tomorrow's central banks and most importantly against the possibility of a big NFP miss.
This could quickly bounce back the other way, or it could mark a shift that results in a test of the long term uptrend in yields--a battle that would be fought around 1.75% in 10yr Treasuries. Either way, it seems to present a good opportunity to take risk off the table ahead of big-ticket events, especially if you see one of the positive reprices that should be on the way (if you haven't seen one already).
1:16PM :
ALERT ISSUED:
Another Notch Higher, Led By Technical Break In Treasuries
Treasury futures activity picked up rather aggressively between 12:40 and 12:50, coming to a head right as 10yr yields met with their previous lows. The next tick lower in yield caused an immediate tradeflow-driven move down to 1.807, essentially retesting the lowest yields of the year.
At 103-16, MBS can't even come close to saying they're near their best levels of the year, but they've nonetheless managed to participate reasonably well in today's Treasury-led rally. Fannie 3.0s notched up to those new highs right at the same time, and have held that ground long enough that a few more lenders may be considering positive reprices.
Keep in mind that the reprice potential is probably more limited than it "feels" like it should be based on the "+0-10" on the day or the shape of the charts because most lenders released their first rate sheets after the bulk of the morning's rally.
At 103-16, MBS can't even come close to saying they're near their best levels of the year, but they've nonetheless managed to participate reasonably well in today's Treasury-led rally. Fannie 3.0s notched up to those new highs right at the same time, and have held that ground long enough that a few more lenders may be considering positive reprices.
Keep in mind that the reprice potential is probably more limited than it "feels" like it should be based on the "+0-10" on the day or the shape of the charts because most lenders released their first rate sheets after the bulk of the morning's rally.
Live Chat Featured Comments
A recap of the featured comments from the MBS Live Dashboard's Live Chat feature, utilized by hundreds of industry professionals each day.
John Rodgers : "REPRICE: 2:59 PM - USBank Better"
Eric Franson : "WF 2nd"
Eric Franson : "REPRICE: 2:58 PM - Wells Fargo Better"
Nate Miller : "REPRICE: 2:28 PM - Caliber Funding Better"
Matthew Graham : "this will be the 13th session since January 25th that's hit 103-16 to 103-19 range and we've only closed above on one of those occasions. I'm not sure I'd limit it to one specific price level, but certainly an inflectional area for MBS prices (as the 00's and 16's tend to be...)"
Steve Chizmadia : "MG, if my memory serves me correctly 103-16 was important last time we were at these levels. Still the case? "
Jason York : "REPRICE: 2:13 PM - Fifth Third Mortgage Better"
Matthew Graham : "Europe fears, range exploration in bond markets, Treasuries getting caught up with Bunds, signs of a broader shift in asset-allocation trade, 3 central banks tomorrow, 2 reports today adding major negative anecdotes to Friday's NFP picture. Definitely a major hedge going into place against an NFP miss, and it's very likely we'd move higher in yield if NFP merely hits consensus as it sits today."
Victor Burek : "and our stocks might be ready to have a pull back"
Victor Burek : "i think this is more to do with europe fears coming back into play"
Scott Rieke : "not too many good headlines out there"
Victor Burek : "and even worse in Europe"
Matthew Graham : "i don't think broader move is anything to do with NK"
Victor Burek : "the data has been pretty weak lately"
Victor Burek : "sure, maybe a blip or so, but the broader move"
Matthew Graham : "oh, the move at 1:39pm definitely is NK Vic. Maybe you're talking about the broader move on the day"
Victor Burek : "i could be wrong, and its impossilbe to prove one way or the other, i just dont think this move has anything to do with NK"
Scott Rieke : "That crazy Kim, he must be refi'ing his houses over here"
Matthew Graham : "RTRS RTRS-U.S. DEFENSE SECRETARY HAGEL CITES "REAL AND CLEAR" DANGER FROM NORTH KOREA, U.S. WORKING WITH CHINA, OTHERS TO DEFUSE TENSIONS"
Matthew Graham : "also, we may finally have our geo-political risk-off bid from Korea news..."
Matthew Graham : "This rally is definitely asking to be taken seriously. These aren't casual, low volume moves at inconsequential levels. 10's just broke annual yield lows in active trading on an uptick in volume and with new money coming into the market. There's some short covering going on, for sure, but for the first time in several weeks, we're seeing a meaningful move, with more than incidental levels of conviction."
Jason Wilborn : "I agree with that AR"
Andrew Russell : "If you guys dont lock today/tomorrow you are crazy pants!"
Scott Rieke : "in my humble opinion - 1.95(ish) if it's a strong print. First inflection point"
Matthew Graham : "from a 1.80+ vantage point, 2.06 seems a bit overly pessimistic, no? It took a full week of heavy selling in early march to make such a move"
Christopher Stevens : "MG- I assume this rally is staying afloat in anticipation of a poor NFP Friday. If the NFP is in line or only a little worse than forecast what is the floor on the 3.0 we should be looking at? Or ceiling on the 10YR...2.06 maybe?"
Victor Burek : "gonna lock everythign under 20 for sure today"
Christopher Stevens : "this is a nice locking opportunity. I am still a little weary floating through Friday NFP"
Victor Burek : "thats better, keepem coming"
Lynn ONeal : "REPRICE: 1:22 PM - Franklin American Better"
Matthew Graham : "REPRICE: 1:22 PM - Plaza Better"
B-C : "i actually got .125 i am shocked"
Victor Burek : "sure wish some reprices would come"
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