The last 5 days have been ugly for bond markets--not quite as the beginning of February, but this time around, we aren't bouncing off multi-year lows.  This 5-day route tacks on to the end of what had already been a flat-to-slightly-weaker trend throughout April.  It was a carefully chosen directional move that followed rampant uncertainty as opposed to February's sell-off which was a reaction to an apparent bottoming out in yields combined with a quick increase in Fed rate hike expectations.

German Bunds continue to be in the drivers' seat.  They've weakened a whopping 40bps in just under 2 weeks.  US 10's haven't even lost half that much.  This is by far and away the biggest correction to the yearlong Bund rally that began early last year.  In general, if it continues, Treasuries will continue to face upward pressure.  The extent to which they give into those European influences will depend largely on domestic economic data. 

All of the above means we can cross our fingers for 2 things: a bounce in Bunds or rotten data.  Tomorrow offers the week's first prime opportunity for the latter with ISM Non-Manufacturing.  The tone of trading after that will tell us a lot about the approach to the rest of the week.  Between now and then (and indeed, until further notice), it makes the most sense to assume weakness will continue until we have a compelling reason to believe otherwise.  That may be almost impossible to come by before Friday's NFP numbers.


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
101-06 : -0-08
FNMA 3.5
104-10 : -0-06
FNMA 4.0
106-20 : -0-03
Treasuries
2 YR
0.6030 : +0.0040
10 YR
2.1460 : +0.0343
30 YR
2.8780 : +0.0523
Pricing as of 5/4/15 5:28PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
3:30PM  :  ALERT ISSUED: Just a Bit More Negative Reprice Risk for Good Measure
12:02PM  :  ALERT ISSUED: Negative Reprices Now Likely
11:20AM  :  ALERT ISSUED: Negative Reprice Risk Increasing
9:34AM  :  US Bond Markets Resilient Despite European Weakness.

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "tomorrow always might be. And it will always be an "awww shucks" moment if you just happened to lock. Just have to decide which pain you fear the most: that 'awww shucks' moment, or the one where you lose all your deals and piss off clients because you advised against locking. Times like this, it seems to make most sense to risk the 'aww shucks.' "
Matt Hodges  :  "but, mg...tomorrow will be different."
Matthew Graham  :  "seems that everyone has been pretty heavy lock mode since we started lifting off from the flatness in mid April. If you didn't or weren't able to get in on that, I would still probably hesitate to float into an ongoing sell-off that continues to make new lows almost every day."
Ted Rood  :  "momentum clearly running against us"
Steve Chizmadia  :  "Incredible high risk/reward leading up to and through NFP and Friday morning"
Sung Kim  :  "trend doesnt seem to be our friend, and the NFP ramp coming up"
Matt Hodges  :  "you summarized it well, Doug"
Doug Ramsey  :  "What are people's thoughts on locking vs. floating for deals closing in 30-35 days? I've got a handful of clients who are in a position to lock, but the loss of .25-.375 in pricing put a hurt on their lender credits last week. It's pushed the rates up .125%- .25% for refi's and increased the cash to close on a purchase or two for the same rate we were bench-marking. I'm afraid the hole will get larger if I wait and then cause even greater problems so i tend to be conservative and lock when the market starts moving like this..."
Matthew Graham  :  "RTRS- EVANS: ONE COULD ARGUE THAT FED IS NOT ACCOMMODATIVE ENOUGH"
Matthew Graham  :  "RTRS- EVANS: SIGNIFICANT RISKS, FEW BENEFITS TO INCREASING RATES PREMATURELY"
Matthew Graham  :  "RTRS - EVANS: NO SERIOUS COSTS OF MODESTLY OVERSHOOTING INFLATION TARGET"
Matthew Graham  :  "RTRS- EVANS: INFLATION WON'T REACH 2 PCT UNTIL 2018, NEED GREATER CONFIDENCE IT WILL RISE"
Matthew Graham  :  "RTRS- FED'S EVANS: RATE HIKE LIKELY NOT APPROPRIATE UNTIL EARLY 2016"
David Rudnick  :  "ughhhh 100bps in 5 days huh... what do you guys think , rebound or lock what you can!"