MBS MID-DAY: Solid Gains Despite Upcoming Treasury Auctions
By:
Matthew Graham
•
MBS Live: MBS Morning Market Summary
Even with Treasury auctions coming up at 1pm today and tomorrow, bond markets are already pushing back against yesterday's weakness. This is happening in the absence of data or other event-based motivation. It could be part of broader sideways momentum that stands a chance of remaining until next week's FOMC Minutes. It could also be something better than that, but we haven't seen nearly enough positivity or volume in order to suggest it's anything more than 'leveling-off.'
MBS prices are up roughly 3/8ths of a point. The 10yr Auction is coming up at 1pm and is the only significant event on the calendar.
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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Morning 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 morning.
9:14AM :
Bond Markets Strengthen Overnight; Fighting For Technical Support
Although volume has been a bit low, Treasuries attracted modest buying in Asia--enough to bring 10yr yields under 2.75. After drifting back up to 2.765 during European hours, early domestic trading brought another push lower, this time into the 2.73's.
Some of the positivity is assumed to be short covering, meaning that traders had bets on rates moving higher, sold Treasuries at some point in the past 2 weeks (short position), and were now buying Treasuries in order to close those bets (buying to cover the short position, aka short covering).
There is also a technical component to this morning's strength (which can serve as a line in the sand for short-covering, or just plain old buying). This has to do with the long-term inflection point at 2.75%. It acted as a ceiling on Friday, a floor yesterday, and now a ceiling today. This is the technical support that 10's would be hoping to hold this morning. If they're able to do that even with the auction coming up at 1pm, and then continue to hold after the auction, we would be able to entertain the possibility that yesterday was a false breakout.
Much of the positivity was in place by the time MBS started trading today and Fannie 3.5s opened at 100-25. They moved up to 100-28 at their best, but are back down to 100-26 currently. This is their analogous technical level to Treasuries' 2.75-ish zone.
Some of the positivity is assumed to be short covering, meaning that traders had bets on rates moving higher, sold Treasuries at some point in the past 2 weeks (short position), and were now buying Treasuries in order to close those bets (buying to cover the short position, aka short covering).
There is also a technical component to this morning's strength (which can serve as a line in the sand for short-covering, or just plain old buying). This has to do with the long-term inflection point at 2.75%. It acted as a ceiling on Friday, a floor yesterday, and now a ceiling today. This is the technical support that 10's would be hoping to hold this morning. If they're able to do that even with the auction coming up at 1pm, and then continue to hold after the auction, we would be able to entertain the possibility that yesterday was a false breakout.
Much of the positivity was in place by the time MBS started trading today and Fannie 3.5s opened at 100-25. They moved up to 100-28 at their best, but are back down to 100-26 currently. This is their analogous technical level to Treasuries' 2.75-ish zone.
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.
Andrew Horowitz : "sorry for not corroborating, but I know plenty of new LO's that have just started to delve into the purchase market and they are succeeding, this business has always been about one thing, you are anoly as good as how hard you want to work"
Andrew Russell : "You dont just "break" into the purchase market, so those that are there already will prosper "
Nathan Stotlar : "CS - I do 90% purchase business and most of the people I am talking to now are looking to buy in Q1 or 2 of 14. Most of the real estate folks I talk to are cautiously optimistic for 2014."
Andrew Russell : "There is nothing more valuable to a homepurchaser than a knowledgeable LO with great information and a sharp price"
Steven M. Sims : "CS - I do almost all purchase. Our market, like most has really heated up and become a sellers market. I see that calming down a little but I think the drop in volume will come from refi, at least speaking for myself my volume hasn't fallen off at all, knocking on wood"
Christopher Stevens : "the MBA is forecasting a 32% drop in overall mortgage volume in 2014. I agree that refinance business will not be as robust as 2013 but I am torn on purchase business. I have a two-fold question. For those that do a majority of purchase business do you see volume dropping in 2014? And if yes will it be due to lack of people wanting to purchase or more so that the loans will not meet QM criteria?"
Matthew Graham : "RTRS - WELLS FARGO & CO WFC.N CFO: MORTGAGE MARKET WILL PROBABLY STABILIZE NEXT YEAR "
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