Once again, bond markets find themselves in weaker territory simply due to the corrective forces that follow strong rallies, and once again, resiliently so.  10yr yields have been losing ground at a very gentle pace during the domestic session, though they were already moderately weaker at the open.

While that overnight weakness also translated to lower opening levels for MBS, Fannie and Freddie 30yr coupons have actually been GAINING ground on average since then (as opposed to Treasuries losing ground).  Additionally, Fannie 3.0s are only down 6 ticks on the day compared to 14 ticks in the price of 10yr Notes. 

What's up with that?  Nothing too complicated, really.  First of all, it's normal for MBS to gain less ground on the way down and lose less on the way up.  Also, in addition to the broad correction, there's also a correction in the 'curve bias.'  That refers to the flattening or steepening trend in the yield curve, regardless of overall strength or weakness.  In other words, if there's a flattening trend, 2yr and 10yr yields are getting closer together, whether their actual yields are moving higher or lower.

Part of the recent rally had been an aggressive flattening trend.  In other words, longer term yields were falling while shorter term yields were holding steady or rising.  As the big move sees this correction, shorter term yields are holding steadier while longer term yields are rising.  For instance, 2yr yields are unchanged at the moment while 10yr yields are 5.4bps higher.  This is a slight benefit for MBS as well because the average life span of the MBS coupons that most directly relate to rate sheets isn't quite as high as benchmark 10yr yields. 

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
102-02 : -0-08
FNMA 3.5
104-28 : -0-05
FNMA 4.0
106-31 : -0-01
2 YR
0.6170 : +0.0000
10 YR
2.0250 : +0.0560
30 YR
2.5990 : +0.0670
Pricing as of 1/8/15 1:13PMEST

Morning Reprice Alerts and Updates
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9:50AM  :  Bond Markets on the Back Foot, but Still Resilient

Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Jeff Anderson  :  "How about the last line of this article. More proof that the journalists don't know how things work. http://mndne.ws/1xJLXR7"
Matthew Graham  :  "RTRS- US JOBLESS CLAIMS FELL TO 294,000 JAN 3 WEEK (CONSENSUS 290,000) FROM 298,000 PRIOR WEEK (PREVIOUS 298,000)"
Christopher Stevens  :  "HUD has authority to lower FHA MIP w/out approval from Congress. I believe the White House release is talking about GSE reform needing approval from Congress. "
Matt Hodges  :  "i don't read it as "must pass Congress". There were several references to working with congress on housing, but i don't see a tie to this specific announcement that it must go through Congress."