MBS RECAP: Mediterranean Cruise Turns Toward Italy
By:
Matthew Graham
•
MBS Live: MBS Afternoon Market Summary
There was a sense at the end of last week, looking back over the regular sideways trading patterns in bond markets, that we'd "been had," in a way. With the benefit of hindsight, all the Cyprus-related drama could easily be seen as a temporary diversion bridging the gap between relevant market events. Was there, and is there still a risk of systemic impacts from Cyprus? Sure, but credit spreads across the EU Periphery never swelled beyond levels that would indicate this was a "big deal." It was definitely the most interesting thing going on last week, however. Today then, was a fitting conclusion to last week's drama, with a bailout deal reached and bond market levels almost exactly where they were on Friday night. Our metaphorical cruise of the Mediterranean moved from Greece to Cyprus, but looks to have quickly looped the island and slingshotted itself toward Italy. Headlines are expected this week as to whether or not new elections will be needed or if Bersani will be able to scrape enough support together for a confidence vote next week. Hmmm... Confidence vote in Italy on NFP week? Things could get interesting if that happens.
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.
11:37AM :
Eurogroup Pres Says Cyprus Deal Should Be Seen As Template
A major contributor the the movement in the past hour:
(Reuters) - A rescue program agreed for Cyprus on Monday represents a new template for resolving euro zone banking problems and other countries may have to restructure their banking sectors, the head of the region's finance ministers said.
"What we've done last night is what I call pushing back the risks," Dutch Finance Minister Jeroen Dijsselbloem, who heads the Eurogroup of euro zone finance ministers, told Reuters and the Financial Times hours after the Cyprus deal was struck.
"If there is a risk in a bank, our first question should be 'Okay, what are you in the bank going to do about that? What can you do to recapitalize yourself?'. If the bank can't do it, then we'll talk to the shareholders and the bondholders, we'll ask them to contribute in recapitalizing the bank, and if necessary the uninsured deposit holders," he said.
(Reuters) - A rescue program agreed for Cyprus on Monday represents a new template for resolving euro zone banking problems and other countries may have to restructure their banking sectors, the head of the region's finance ministers said.
"What we've done last night is what I call pushing back the risks," Dutch Finance Minister Jeroen Dijsselbloem, who heads the Eurogroup of euro zone finance ministers, told Reuters and the Financial Times hours after the Cyprus deal was struck.
"If there is a risk in a bank, our first question should be 'Okay, what are you in the bank going to do about that? What can you do to recapitalize yourself?'. If the bank can't do it, then we'll talk to the shareholders and the bondholders, we'll ask them to contribute in recapitalizing the bank, and if necessary the uninsured deposit holders," he said.
11:07AM :
ALERT ISSUED:
Italy Paves The Way For US Bond Market Improvement
The latest spike lower in stocks, Treasury yields, higher in MBS prices, etc., was clearly led by Italy. Take a look at THIS CHART (teal = Euros, green = Bund yields, blue = S&P futures, yellow = 10yr yields, white = inverted Italian 10yr spreads). Essentially, the lower the white line goes, the more concerned investors are about Italy.
The move comes after Eurogroup President Dijsselbloem said that the Cyprus deal should be seen as a template for the rest of the Eurozone. Yikes... Markets are been saying "yikes" ever since.
Fannie 3.0 MBS are currently up 2 ticks at 102-30 and 10yr yields are in positive territory now at 1.9163. Lenders that released rate sheets around 10am or earlier may soon be considering a positive reprice if current levels are maintained or improved upon in MBS, but we'd probably need a few more ticks before more than one or two lenders stand much of a chance to get involved with such a thing. Either way, so far so good as far as the bounce back against a potentially ugly morning is concerned!
The move comes after Eurogroup President Dijsselbloem said that the Cyprus deal should be seen as a template for the rest of the Eurozone. Yikes... Markets are been saying "yikes" ever since.
Fannie 3.0 MBS are currently up 2 ticks at 102-30 and 10yr yields are in positive territory now at 1.9163. Lenders that released rate sheets around 10am or earlier may soon be considering a positive reprice if current levels are maintained or improved upon in MBS, but we'd probably need a few more ticks before more than one or two lenders stand much of a chance to get involved with such a thing. Either way, so far so good as far as the bounce back against a potentially ugly morning is concerned!
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.
Paul L. Martin : "REPRICE: 3:56 PM - Suntrust Better"
Dan Crowley : "REPRICE: 3:07 PM - Franklin American Better"
Matthew Carver : "REPRICE: 3:06 PM - Sierra Pacific Better"
Mike Drews : "nice support at 1.92"
Matthew Carver : "REPRICE: 2:22 PM - Flagstar Better"
Matthew Graham : "Note the bounce for equities and Treasuries concides roughly with EU markets 5pm close. One decent guess is that the strong risk-off movement during European hours simply has less of a bid now that they're closed. "
Bert Swyers : "where is the green going?"
Nate Miller : "REPRICE: 1:20 PM - Interbank Better"
Matthew Graham : "all right here in this pamphlet TQ - http://tinyurl.com/bn7oqxs"
Matthew Graham : "quite a troublesome concurrent line inside that trend that hasn't been broken in 2013 that rests on 1.876 today"
Matthew Graham : "long term uptrend, I have 1.72 and 2.119 currently at the outer limits"
Matthew Graham : "TQ, depends on the time frame"
Thomas Quann : "MG-- What is the range we are operating in?"
Jeff Anderson : "REPRICE: 1:03 PM - Chase Better"
Matthew Graham : "REPRICE: 12:33 PM - Plaza Better"
Matthew Graham : "no marginal about it. They were there for tax reasons. they knew damn well it wasn't as safe as other places, and it was a calculated risk to leave their money there."
Brent Borcherding : "MG- are you marginally implying depositers might have/should have known such a move was possible?"
Cory Bannerman : "money laundering... tax evasion... hiding money from the spouse.... you pick"
Matthew Graham : "every last one of them knew there were safer places they could keep their money."
Victor Burek : "you said unless in it for a different reason? what other reason?"
Victor Burek : "so it wasnt cause they thought their money was safe?"
Matthew Graham : "no one, unless they're in it for a different reason. that's the whole point of the cyprus deal and the EU's firmness on the matter"
Victor Burek : "38billion was in cyprus"
Matthew Graham : "who in their right mind has over 100k in EU periphery?!?!?!?!"
Victor Burek : "and if the people with over 100k pull their money out. the only money left will be the sub 100k"
Matthew Graham : "I don't know the nitty gritty details on this "offshore tax dodge for wealthy Russians" business, but it FEELS like a "jig is up" sort of thing given the level of outcry from Russia."
Matthew Graham : "that's a calculated risk for them then. Just like it was for those in Cyprus"
Cory Bannerman : "i would hope so MG but the natural greed in a person would probably lend large depositors to chase the yeild on high dollar deposits.... just my guess... "
Victor Burek : "but there is still many with over 100k in those countries"
Matthew Graham : "you'd probably smack them, and probably would have as early as late 2010."
Matthew Graham : "what would you say to a client that had over 100k in any EU periphery bank?"
Cory Bannerman : "My thought is that anyone with deposits over the 100,000 EU mark in a troubled country will start re-distributing their wealth which could cause the banks to actually need bailouts...."
Brent Borcherding : "Dij just said what everyone is thinking. Again, their current solution is the future problem. That's the real story."
Edgar : "MG-I think at a minimum The Dij set the stage for a crisis to develop into a panic. Meaning that when we have the next flare up in Europe his comments today will help propel the panic forward causing a massive flight to safety."
Rob Clark : "REPRICE: 12:00 PM - Provident Funding Better"
Christopher Stevens : "REPRICE: 11:49 AM - Wells Fargo Better"
Matthew Graham : "the big jump lower in the white line begins perfectly with the Dijsselbloem comments."
Matthew Graham : "http://tinyurl.com/cm7s32d here's the chart referenced in the alert in case it's not readily clickable"
Andy Pada : "just in case you didn't believe it, this is the roadmap."
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