Some time between yesterday's European Central Bank (ECB) announcement and this morning's open, market participants decided to interpret the QE program as buying a fixed amount of bonds of Eurozone countries based on their weighting (aka "capital key") in the ECB.  While the statement does indeed say that purchases will be based on the capital key, it doesn't specify whether that refers to maximum eligible purchases or a flat guarantee to  split the €60bln according to the key.  The latter seems to be the consensus.

That means that Germany, France, and Italy will receive nearly half of the purchases.  This would more than explain the roaring move to new all-time low yields in German Bunds when QE was ostensibly about lifting up the periphery.  But perhaps this is the price Europe must pay for a chance at getting this through the legal spiderweb that threatened to prevent the last bond-buying program. 

To make matters less Fed-like, keep in mind that the ECB won't start buying until March.  Of course if they are going to buy a guaranteed €60bln/mo and of course if that's not going to start right away, then of course there's going to be a massive feeding frenzy on the eligible bonds among institutions that will be able to sell to the ECB in March.  Anyway, a massive land-grab in the European bond market is a no brainer.

That no-brainer dragged Treasuries along for the ride.  Treasuries in turn, dragged MBS.  Both hit their best end-of-week closing levels since May 2013, but Treasuries crushed MBS on a relative basis.   MBS just can't keep up with this sort of pace when the movement is originating overseas.  That's not a bad thing as any more volatility is an unwelcome guest in mortgage markets.


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
102-24 : +0-09
FNMA 3.5
105-06 : +0-06
FNMA 4.0
106-28 : +0-04
Treasuries
2 YR
0.4900 : -0.0330
10 YR
1.7890 : -0.0830
30 YR
2.3650 : -0.0790
Pricing as of 1/23/15 5:13PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
10:21AM  :  Bond Markets Off Best Overnight Levels, but Holding Gains

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
John Tassios  :  "Jason, as long as the remaining borrower left was on original note you are fine. "
Andy Pada, Jr.  :  "for DU Refi Plus, you are fine. just run it with the one of original remaining borrrowers."
Jason York  :  "to remove a borrower on a DURP, you have to show that the remaining borrower has been making the payment for the past 12 months, correct?"
Matthew Graham  :  "woops, one last semi-relevant headline: RTRS- US OIL DRILLING RIG COUNT DOWN 49 AT 1,317 (DOWN 99 VS YEAR AGO) IN WEEK TO JANUARY 23 -- BAKER HUGHES"
Matthew Graham  :  "Quick scan of available newswires and headlines suggests the day is unofficially over."