MBS RECAP: Another Day Of Weakness For Bond Markets. This Time, With Volume
By:
Matthew Graham
•
MBS Live: MBS Afternoon Market Summary
Whereas yesterday was one of the lowest volume trading sessions since April, today's was closer to long term averages and the busiest day since August 3rd. Obviously, there's still a risk that we remain in an ongoing trend of weakness, leading rates higher given the several recent instances of moderate sell-offs followed by potentially hope-inducing corrections. Today's sneaky hope-inducing factoid is a supportive bounce at 1.7309 in 10yr Treasuries. This was the same intraday high seen last Thursday after the 30yr Bond Auction and was touched, but not broken today during regular Treasury hours (though it did break after 3pm in less than significant volume). So this is much less of an informative way to end the day than we'd hoped. You'd be totally justified feeling like your arm was twisted into locking today only to find that 1.7309 might stand out as ongoing support into the end of the week.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
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Afternoon Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts and updates issued via email and text alert to MBS Live subscribers this afternoon.
11:42AM :
ALERT ISSUED:
10's Crack Highs, MBS Fall Through Support, Reprice Risk Up
There's one saving grace for this morning's bond market weakness: 10's have yet to move any higher than 1.7309, the exact same level hit last Thursday afternoon following the 30yr Bond Auction. So there's some hope that this "ceiling" could continue to hold, but at 1.7258 currently, we remain dangerously close.
MBS formed nice "triangles" in both 3.0's and 3.5's this morning and subsequently have taken out all but the horizontal support lines at the mornings earlier lows (basically, the least aggressive technical support levels against the onslaught of selling).
Depending on the time frame of your initial rate sheet and on how conservative the lender in question may have been, negative reprice risk is already increasing though we'd note a fairly narrow range since 9:30am. This, combined with the generally negative tone on the morning likely mitigates most of the reprice risk unless we find ourselves falling further from here. This would be likely to coincide with a break of the supportive ceiling in 10's.
MBS formed nice "triangles" in both 3.0's and 3.5's this morning and subsequently have taken out all but the horizontal support lines at the mornings earlier lows (basically, the least aggressive technical support levels against the onslaught of selling).
Depending on the time frame of your initial rate sheet and on how conservative the lender in question may have been, negative reprice risk is already increasing though we'd note a fairly narrow range since 9:30am. This, combined with the generally negative tone on the morning likely mitigates most of the reprice risk unless we find ourselves falling further from here. This would be likely to coincide with a break of the supportive ceiling in 10's.
Live Chat Featured Comments
A recap of the featured comments from the MBS Live Dashboard's Live Chat feature, utilized by hundreds of industry professionals each day.
Matthew Graham : "we're getting an uptick in volume off this most recent bounce yes, which is promising"
Michael Kelleher : "is that boom from the bounce MG, tell me there is enough volume behind it to back up a dump truck?"
Matthew Graham : "hope so Bert. Too soon to call that ball probably"
Bert Swyers : "1.7309 bounced"
Andy Pada : "I don't mean to be Gatsby (because we know how he ends up) but this frustrating wave metaphor makes me feel like boat beating against the current, borne back ceaselessly into the past."
Matthew Graham : "closest I can get to that would be to say that the prevailing technical/tradeflow-based trends SOMETIMES hide behind fundamental events to move more stealthily toward their goals."
Andy Pada : "Can I conclude that this current wave is a result of this morning's US data? "
Matthew Graham : "again, mixing techs/flows with fundamentals doesn't always make sense. AQ was harping on this point last week. You can get really tired really quick if you swim against waves rather than ride them. All your strongly convicted fundamental beliefs do for you is give you hope that the tide will change in a logical manner when the current wave subsides."
Andrew Horowitz : "You always have to say in the back of your mind what if, well bond traders right now are saying what if they do come up with a fix in Europe, the answer is I don’t want to be in bonds when that happens, that is the prevailing mindset and you don’t fight the trend
"
Matthew Graham : "here's your rationale: because that's what markets are doing. "
Andy Pada : "if rates go up, they go up...fine. But I need the rationale for the change in sentiment from a declining interest rate trend to a rising interest rate trend? "
Matthew Graham : "maybe so, but it's been a gentle, warm, soothing, profitable fire for about a year"
Christopher Stevens : "I am of the opinion that if you are not locking your pipeline as you go you are playing with fire. "
Matthew Graham : "this is not new news though on the trend risks. http://www.mortgagenewsdaily.com/mortgage_rates/blog/270176.aspx"
Jeff Anderson : "Europe has been way too quiet lately IMO. Holiday's are coming to an end. We'll see what that brings us."
Victor Burek : "with europe imploding, why would money flow into risk"
Gus Floropoulos : "this can be very bad, adding the fact that major money will be coming into play after labor day"
Matthew Graham : "might be too much to ask though"
Matthew Graham : "I REALLY like the technicals if we stave off 1.7309"
Gus Floropoulos : "i dont like the technicals here"
Gus Floropoulos : "no mans land, but definately bearish"
Matthew Graham : "here's the 1.8 and 1.67 major pivot points with 44, 100, and 250 day moving averages. We're sort of in that "no man's land" in between at the moment. Not fun: http://tinyurl.com/99zzes9"
Brett Boyke : "today threw more cold water on QE, no?"
Matthew Graham : "1.8 is the uber high-end pivot. resting along late 2011/ early 2012 lows. Not necessarily game over, but not fun."
Raul Lopez : "Are we looking at the end of our honey moon?"
Gus Floropoulos : "so 1.8 on that 10 yr MG is basically game over"
Raul Lopez : "Well, am gonna buy a few trillion in MBS to turn this around. They take Amex?"
John Paul Mulchay : "Swmc price change alert received. No new sheet yet "
Matt Hodges : "DOJ, SEC, who else will pick on WF?"
Matthew Graham : "RTRS- SEC SAYS CHARGES WELLS FARGO & CO WFC.N FOR SELLING COMPLEX INVESTMENTS LINKED TO MORTGAGE-BACKED SECURITIES WITHOUT DISCLOSING RISKS "
Paul L. Martin : "ohhh...he is right...it is just his timing. Buy when he says sell and sell when he says buy and you are OK."
Brett Boyke : "he has to be right one of these days"
Paul L. Martin : "Bill Gross says "stay short my friends"....he is my #1 contrary indicator...I guess we will see."
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