MBS MID-DAY: Bond Markets Hover Near Recent Highs Ahead of FOMC

By: Matthew Graham •

Treasuries experienced significant volatility overnight, rising abruptly to the highest yields since last Thursday as Asian markets opened, only to fall to 2-Month lows early in the domestic session.  That made for a much wider than normal range (2.79 to 2.706).  The leading suspect for the bond market positivity continues to be the emerging market currency meltdown, led by the Lira.  Correlation finally became more compelling today (until today, the red line hadn't lined up so well with the others):

Bond markets continue to hover near their best levels of the day.  Notably, 10yr yields touched their lows from last Friday (2.706) but failed to break any lower.  MBS, however, made new highs as they continue trying to play catch-up to Treasuries, which have received more benefit from the flight-to-safety rally initially.

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
96-25 : +0-08
FNMA 3.5
101-03 : +0-07
FNMA 4.0
104-17 : +0-06
Treasuries
2 YR
0.3593 : +0.0153
10 YR
2.7150 : -0.0330
30 YR
3.6597 : -0.0123
Pricing as of 1/29/14 11:55AMEST
Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Brian Bockholdt  :  "MG- or anyone. Can you explain why the 10 yield moves over night and if it really matters if it's in the red over night, because it seems to go a completely different direction once the US markets open. "
Scott Valins  :  "other international markets trade the treasuries while we are sleeping BB"
Victor Burek  :  "economic news and data is released around the clock which might make investors buy or sell treasuries"
Ira Selwin  :  "Interesting article in the news stream - the Bloomberg article about "Non-Prime""
Victor Burek  :  "seems the turkey rate hike hasn't accomplished anything...lira has reversed the 4% gain against the dollar"
Victor Burek  :  "this is probably why we are in the green and treasuries reversed from 2.80 to 2.74"
Andrew Horowitz  :  "Futures are dropping"
Andy Pada, Jr.  :  "morning all. why so green?"
Victor Burek  :  "despite the turkey rate hike, lira is weaker now"
Andy Pada, Jr.  :  "how does a weaker lira help?"
Matthew Graham  :  "the theory is that a collapse in emerging market currencies, brought on by Fed tapering, is driving a massive global flight to safety, benefiting core currencies like the Yen, and safe-haven assets like Treasuries."
Bryce Schetselaar  :  "debating here...do I pull the trigger on a purchase or gamble..."
Victor Burek  :  "no need to lock right now"
Oliver Orlicki  :  "i am floating"
Roger Moore  :  "floating to at least to FOMC"
Victor Burek  :  "absolutely, everyone should float til then, and keep floating and only lock if we sell of afterward"
Ted Rood  :  "Sure nice to have the confidence to float into these events, knowing we have the inside knowledge to lock quickly when markets worsen. Not like the "old days" when I had to watch the 10 year yield on Bloomberg and HOPE to beat worsens."
Matthew Graham  :  "That can make sense as long as you're well aware of how fast your lender(s) can freeze pricing. In some cases, there's not enough time to lock on FOMC days no matter how fast you move."
Matt Hodges  :  "some might simply suspend pricing, not change it at 1:55"