• Today's pull-back really began yesterday, and involved stocks moving higher with bond yields
  • Momentum continued through the overnight session for bonds, but stocks pulled back
  • The divergence was sharpest after 9:30am, suggesting ETF-related selling
  • Multiple motivations in play, but most are waiting on next week's Brexit vote

Yesterday morning marked a turning point for stocks, bonds, and various metrics that speak to Brexit-related anxiety.  One of the easiest places to see that turning points is in British currency (Sterling) compared to US Treasuries.  As you can see, Treasuries aren't really taking the bounce as seriously.

2016-6-17 Treasury vs Sterling

Brexit aside, Treasuries are also very far into their most recent momentum cycle, based on various technical measures.  Some of those measurements are already suggesting a bounce is underway.  That's quite a predicament considering we have a few days of trading left to go until next Thursday's Brexit vote.  On the one hand, there will be natural pressure for bonds to keep pace with any broader correction in sentiment.  On the other hand, no one wants to miss a chance to be owning Treasuries if Brexit happens next week.  

Long story short, there's a good amount of indecision at the moment.  It's been compounded by pre-weekend tradeflows today, specifically.  The 9:30am time frame saw a marked move into weaker territory in both stocks and bonds, suggesting ETFs and other investors that depend on NYSE liquidity were getting out of the market ahead of a weekend where Brexit-related headlines are a distinct possibility.  Like those investors, we'll all have to wait to see how momentum shapes up as next week begins.  For now, today's weakness is the first potential sign of trouble, but something that would need to be confirmed before we are too troubled by it.

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
102-32 : -0-04
10 YR
1.6080 : +0.0450
Pricing as of 6/17/16 4:22PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
12:18PM  :  ALERT ISSUED: Negative Reprice Risk Considerations as Bonds Remain Under Pressure
10:35AM  :  ALERT ISSUED: Bonds Getting 'Pounded' as Brexit Trade Cools Into Weekend

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Christopher Stevens  :  "tightening up positions before heading to the Hamptons"
Sung Kim  :  "what's up with the sell-off???"