MBS RECAP: Bond Markets Weakest Since September after FOMC
By:
Matthew Graham
•
MBS Live: MBS Afternoon Market Summary
Bond markets are at their weakest levels since just before September's FOMC "no taper" announcement after today's FOMC "really actually fairly interested in tapering" Minutes. Volume is the highest it's been since then as well, and that's not the sort of thing you want to see when 10yr yields are hard-charging through technical ceilings. There was a decent amount of volatility in play even before this afternoon's FOMC minutes (discussed here), but it was nothing compared to the movement seen afterward. Some of the underlying themes were discussed here, but the bottom line is that the Minutes acted as sort of a wake up call about the Fed's desire to decrease asset purchases--one that runs counter to their recent sentiment campaign of speeches regarding "not time to taper yet" and calls to focus on the forward rate guidance over asset purchases.
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.
2:42PM :
ALERT ISSUED:
More Weakness (It was just regrouping...)
MBS and Treasuries (and stocks for that matter) are now heading into new price lows for the day. 10yr yields are up to 2.79 and Fannie 3.5s are down 14 ticks to 101-03. Reprice risk remains maxed-out for those who have yet to see one, and fairly high for those who haven't seen one since the Fed Minutes.
2:30PM :
Heads-Up: Weakness Pauses, Either to Regroup or Rebound
10yr yields are now down 2 bps from post FOMC highs, currently at 2.755 vs 2.775. Fannie 3.5s are down 8 ticks at the moment at 101-09. Too soon to know if we're seeing a consolidation before more selling or the early stages of a defensive stand.
2:12PM :
ALERT ISSUED:
MBS Hit New Lows After FOMC Minutes; More Reprice Risk
The minutes are being read as conveying a decidedly more aggressive stance on reducing asset purchases. The Fed is vigorously debating how and when to do it. Stocks and bond prices are both swooning. Fannie 3.5s are down 12 ticks on the day now at 101-06. Negative reprices are guaranteed if you haven't seen them already and 2nd rounds are possible if you have.
12:44PM :
ALERT ISSUED:
Selling Continues; Negative Reprice Risk Increases
In the past 10 minutes, the selling pressure mentioned in the previous alert gained a bit of momentum. 10's are very close to the highs of the day now (2.741 vs 2.745). Fannie 3.5s are down 4 ticks on the day now at 101-14. Most lenders are at risk of a negative reprice.
12:34PM :
ALERT ISSUED:
Bond Markets Selling-off Quickly on Bullard Comments
Hopefully by the time you read this the selling-off will have run its course. It has moved fairly quickly so far with 10's popping up a quick 2 bps in the last 10-15 minutes. Fannie 3.5s have shed a quick 5-6 ticks in the same time, now down 1 tick on the day at 101-16. This introduces some reprice risk, but nothing extreme just yet. This wont' be "the thing" that causes extreme movement today, but it has made for some noticeable movement inside the day's broader range.
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.
Zach Hardin : "REPRICE: 12:51 PM - Provident Funding Worse"
Matthew Graham : "for those whose firewalls don't like screencast: http://tinyurl.com/mwl92sz"
Matthew Graham : "every candle is a week of trading: http://screencast.com/t/VIdnSaOH8h"
Matthew Graham : "but that's just a byproduct of having our noses pressed against the screen. It's not that bad "
Matthew Graham : "it might seem like that"
Tim Yazawa : "10s been a semi wild ride this week"
Oliver Orlicki : "30 year is getting pasted"
Ted Rood : "I'd be surprised not to see a ton of reprices in the next 10 minutes."
Jonathan Sarver : "he seems to contradict what he says from sentence to sentence"
Matthew Graham : "I'm surprised to see so much reaction to the Eggo man."
Matthew Graham : "Bullard is literally all over the place."
Ted Rood : "Thought Fisher was the big hawk, Bullard not usually so optimistic in my recollection."
Matthew Graham : "RTRS- BULLARD - TAPERING IS ON THE TABLE FOR DECEMBER; NOT SURE IF WE'RE GOING TO DO IT "
Drexel Hill Mortgage, Inc. : "is this pre-emptive strike to 2pm minutes????"
Matthew Graham : "RTRS- BULLARD - NERVOUS ABOUT LOWERING THRESHOLD ON UNEMPLOYMENT RATE AS COULD AFFECT CREDIBILITY; CLD BE "DANGEROUS GAME""
Matthew Graham : "RTRS- BULLARD - CUMULATIVE GAINS IN JOB GROWTH SINCE SEPT 2012 IS MOST POWERFUL ARGUMENT FOR TAPERING "
Ira Selwin : "Who throws a shoe, honestly"
Dustin McAlister : "REPRICE: 12:26 PM - Wells Fargo Better"
philip mancuso : "can someone throw a shoe at him or something."
Matthew Graham : "RTRS- BULLARD - OCT JOBS REPORT WAS VERY ENCOURAGING, CHANGED PICTURE QUITE A BIT "
Matthew Graham : "RTRS- BULLARD SAYS WORTH THINKING ABOUT ADDING FLOOR TO INFLATION THRESHOLD ON FWD RATE GUIDANCE OF 1.5 PCT "
Oliver Orlicki : "amazing how every statement causes these moves"
Matthew Graham : "RTRS- BULLARD SAYS BEST FORECAST IS STILL THAT INFLATION WILL TREND UPWARD, CLOSER TO FED'S TARGET "
Matthew Graham : "RTRS- FED'S BULLARD - SAYS THERE IS NO GOOD EXPLANATION FOR LOW RATES OF INFLATION "
Drexel Hill Mortgage, Inc. : "lunch time slow down????"
JCC : "REPRICE: 12:06 PM - Chase Better"
Jason Zimmer : "31/43"
tim paxton : "anyone know max ratios on FHA maunual underwrite?"
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