Less than 24 hours after trading patterns suggested a risk that bond markets were confirming a bounce against their best levels of the month, those levels have now been broken. In other words, yesterday's weakness reinforced the floor at 2.82% in 10yr yields, but today's mix of data and events brought the jack-hammer.
Why?
First, and perhaps most important is the fact that today has been the first real day of trading so far this week. At the noon hour, we're already well past volume tallies from any previous day. In fact, it's the most active session since NFP day.
The stock lever is helping as S&P's are down a relatively staggering 20 points from yesterday's latest levels, with at least half of that happening since the cash open at 9:30am. Bond yields and stock prices have been HIGHLY correlated.
Economic data has been supportive at home and abroad. Chinese manufacturing data helped get the overnight session off to a positive start and the domestic data has erred on the weak side this morning.
As far as the domestic data is concerned, forget the headlines! It was unequivocally bound to be the case that Existing Home Sales would come in at the best annual levels in 7 years simply due to the last 11 months. What's important is that December is now the second month in a row with a negative year-over-year trend, after more than 3 years spent trending positively.
Jobless Claims was similarly deceptive as the 326k vs 326k forecast looks like no big deal. But the Continued Claims figures remained over 3 million. This was a big factor in last Thursday's bond market strength, but until today, it could have been an outlying piece of data. Now the gloominess has more confirmation.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom.
Real time pricing is available via MBS Live.
| MBS | FNMA 3.0 96-13 : +0-21 | FNMA 3.5 100-23 : +0-19 | FNMA 4.0 104-05 : +0-16 |
| Treasuries | 2 YR 0.3677 : -0.0323 | 10 YR 2.7809 : -0.0791 | 30 YR 3.6890 : -0.0700 |
| Pricing as of 1/23/14 12:44PMEST |
Morning Reprice Alerts and Updates
10:24AM : Bond Markets Head-Fake Higher After Data, but no Follow-Through
8:59AM : Bond Markets Stronger Overnight and After Claims Data
Live Chat Featured Comments
Christopher Stevens : "ahhh the 10YR closer to that cozy 2.82 floor we have been hitting."
Matthew Graham : "RTRS- US JOBLESS CLAIMS ROSE TO 326,000 JAN 18 WEEK (CONSENSUS 326,000) FROM 325,000 PRIOR WEEK (PREVIOUS 326,000) "
Hugh W. Page : "Big data week next week it seems....will be interesting with emphasis on FOMC Wed...."
Matthew Graham : "RTRS- MARKIT U.S. MANUFACTURING SECTOR FLASH PMI FOR JAN AT 53.7 VS 55.0 IN DEC "
Matthew Graham : "RTRS- U.S. HOME PRICES +7.6 PCT IN 12 MONTHS THROUGH NOVEMBER - U.S. REGULATOR "
Sung Kim : "is it me or does 7.6% yoy seem very low compared to previous months?"
Matthew Graham : "good observation, it is an acceleration in the pace of decline"
Matthew Graham :
"here's a chart of the year-over-year values (was 8.065 last month) View Image" Jason Anker : "have not seen the purchase market this slow at this time of year in 4 years"
Christopher Stevens : "MG- Do you think the market is now positioning itself for the Fed to announce less of a taper based on recent data."
Matthew Graham : "I think maybe some people feel that way. I've included that thought in the commentary quite a bit recently."
Christopher Stevens : "Yes, I have noticed that. I just don't se that happening. To announce a taper and then the very next month not do it would make it seem like the FOMC is not in touch with the facts. Or some might say they were bad at guessing where the economy truly was (is)."
John Sheadel : "Tapering one month, then not the next, could also be construed as a good way to manage a slow taper in an unsettled economic environment. Not that I'm saying that's going to happen. "
Matthew Graham : "RTRS - US DEC EXISTING HOME SALES 4.87 MLN UNIT ANNUAL RATE (CONSENSUS 4.94 MLN), VS NOV 4.82 MLN (PREV 4.90 MLN)-NAR "
Nathan Miller : "ouch big drop"
Matthew Graham : "to preemptively answer the "what just happened?" questions. Nothing."
Brian Bockholdt : "please explain"
Michael Gillani : "Actually it's just MBS, 10 yr hasn't moved very much at all"
Matthew Graham : "where to start.... MBS Price indications are a factor of "quotes" from buyers (bid) and sellers (ask). The price you see on the screen is only ever an abstraction of that marketplace."
Matthew Graham : "If buyers and sellers happen to be tuned out for a few minutes, or if one side is trying to make a market, or if there's a wide gap between the two, it can make for the appearance of volatility in the price indications. "
Matthew Graham : "When you see swings like that, look at Treasuries for confirmation. If they're not moving in a similar way, then MBS-specific distortion is to blame."
Matthew Graham : "If Treasuries don't corroborate, 9 times out of 10, the next move in MBS will erase the funky drop or spike."
John Sheadel : "Looks like that drop really was just an aberation"