If there was any doubt as to the market-moving potential of today's Congressional testimony from Janet Yellen, it was quickly cleared up this morning. Well before she began her question and answer session, the mere release of her prepared remarks nearly 2 hours earlier sent bond markets into weaker territory.
The downward slide paused into 10am as she read the prepared remarks, almost as if bond markets were waiting to see if she would say something to "save" the recent rally momentum. That sense of "let down" is also in line with the reaction to prepared remarks. In other words, Yellen had a chance to pay more serious attention to the past two Jobs reports, but instead gave a very much "business as usual" outlook on tapering and Fed policy in general.
There is an understandable gripe with this movement in that one might argue: she's saying nothing new yet bonds are selling! Unfortunately, that's exactly the problem. Yellen is a known 'dove' in that she errs on the side of more accommodative policy. So there was a chance for her to indeed say "something new" by way of expressing more concern about recent economic data. Instead she said she strongly supports the current policy path, thus deflating the hopes of market participants hoping for more bearishness.
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 96-27 : -0-15 | FNMA 3.5 101-07 : -0-15 | FNMA 4.0 104-26 : -0-12 |
| Treasuries | 2 YR 0.3311 : +0.0201 | 10 YR 2.7222 : +0.0442 | 30 YR 3.6941 : +0.0301 |
| Pricing as of 2/11/14 12:21PMEST |
Morning Reprice Alerts and Updates
11:53AM : ALERT ISSUED: Negative Reprice Risk Increasing as MBS Hit New Lows
8:50AM : Yellen's Market Moving Speech
8:37AM : ALERT ISSUED: First Move is Weaker Following Release of Yellen's Prepared Remarks
Live Chat Featured Comments
Christopher Stevens : "Had dinner with an industry leader in compliance and will be meeting with her all day today. What I have learned so far is the CFPB is a very powerful entity that is all about data. They want tons of data when they 'visit' your office and they collect a ton of data for themselves. Not sure how I feel about that. Seems very Orwellian to me"
Christopher Stevens : "does anyone have a question that has been bugging them that they would like me to get an opinion on?"
Matthew Graham : "RTRS - FED'S YELLEN SAYS PICKUP IN ECONOMIC ACTIVITY HAS FUELED FURTHER PROGRESS IN JOBS MARKET BUT LABOR MARKET RECOVERY FAR FROM COMPLETE"
Matthew Graham : "RTRS - YELLEN SAYS SHE EXPECTS "GREAT DEAL OF CONTINUITY" IN FOMC'S APPROACH TO MONETARY POLICY, STRONGLY SUPPORTS CURRENT POLICY STRATEGY"
Matthew Graham : "RTRS - YELLEN SAYS FOMC LIKELY TO REDUCE PACE OF ASSET PURCHASES IN FURTHER MEASURED STEPS IF LABOR MARKET CONDITIONS, INFLATION CONTINUE TO IMPROVE"
Corey Leonard : "So bonds are selling off because yellen said exactly what bernanke and the fed have been saying for the last few months? She literally summarized everything that has been said so what's up with the selloff? Not like anything new came out."
Matthew Graham : "She had an opportunity to express concern about the 2 most recent Employment reports, but instead said 'keep on truckin'"
Brent Borcherding : "I think bonds are "selling off" because we ran out of room to run and likely won't move lower until there is significant data to force it."
Corey Leonard : "Its not like winter doesn't come every year.....obviously this one has been worse, but still, storms and snow happen every year so it shouldn't shock anyone "
Brent Borcherding : "So, we agree that things slow every winter, well, because of the winter and this winter has been worse than most....are we really shocked that investors are using that a potential cause/excuse for the poorer data?"
Michael Gillani : "I thought her statement fell exactly in line with what was expected, so why the selling?"
Matthew Graham : "it's not really a scandalous mystery. She's a well-known dove, but no one knew for sure how her comments would treat tapering in light of recent employment weakness. She didn't have any major concerns about it. She dismissed the emerging market kool-aid, and said tapering is on track. The weakness is super logical IMO. Let me know if you want me to go into more detail though. Not just you, but anyone who's not clear on why it had a moderate effect this AM."
Michael Gillani : "So basically she's not flinching with the weak jobs reports continuing forward with the same plan as was decided in Dec. when taper started, right? Which translates into weakness for bonds"
Matthew Graham : "sounds pretty good"