Although bond markets were already heading toward their best recent levels by Friday night, the move over the weekend was on another level altogether.  10yr yields hit 2.176 just before 7:30am and Fannie 3.5 MBS hit the 8am open at 103-23, more than half a point higher than Friday's latest levels.  In both cases, this was the biggest gap from close to open in over a year.

It continues to be the case that stock prices and bond yields are generally traveling together.  In that sense, much of the bond market strength was related to heavy selling in stocks that began on Friday afternoon.  European bond markets also spiked significantly stronger at 4:30am, presumably following UK inflation data and later, Germany's ZEW investor survey.  German 10yr yields dropped to a record low of 0.838.

Since then, US bond markets have been caught in a bit of tug-of-war between European bonds and domestic equities.  S&P futures have rebounded nearly 20 points from overnight lows and Treasuries have been following, but not eagerly.  While the trend has been modestly higher this morning, it's also been leveling off without 10yr yields crossing above 2.24.  Compared to Friday's close at 2.28, we'll take it!

MBS are doing even better relative in terms of the shape of this morning's trading.  This is generally how things go when Treasuries gap out with a big rally.  MBS can't keep up at first, but then when/if Treasuries stabilize, MBS close the gap.  So whereas 10's are near their weakest levels of the morning, MBS are about halfway back to their best levels of the morning.


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
100-15 : +0-16
FNMA 3.5
103-18 : +0-13
FNMA 4.0
106-07 : +0-09
Treasuries
2 YR
0.3840 : -0.0439
10 YR
2.2270 : -0.0587
30 YR
2.9800 : -0.0340
Pricing as of 10/14/14 12:32PMEST

Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
9:50AM  :  Slight Pullback After Incredibly Strong Move Overnight; Gains Mostly Intact

Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
John Tassios  :  "it won't be a straight line down though, you will have sharp corrections / selloffs along the way. That is why this site is so important to be ahead of the curve on those days and advise clients."
John Tassios  :  "lenders will be more cautious, conservative on rate sheet improvements to see if this holds. this is volatile move all at once"
Victor Burek  :  "lenders really hacked sheets on Friday due to 3 day weekend, should be much more than 50bps better than Friday"
Christopher Stevens  :  "not sure banks have the personnel in place for an influx in refi's. Laid off processors/closers to pay for more compliance staff. Be interesting to see how this plays out. "
Victor Burek  :  "Germany cut their GDP estimates for this and next year...1.2 and 1.3...I believe first estimates was 1.8 and 2.0"
Victor Burek  :  "tons of bad data out of Europe last night"
Scott Valins  :  "3.875"
Christopher Stevens  :  "What's the consensus on where the 30yr needs to be to see a noticeable uptic in refinance business?"
Ben Biscoe  :  "Wow, hopefully this is the start of a refi boom just in time for the holidays. "