MBS RECAP: February Bond Rally Continues in March Thanks to Ukraine

By: Matthew Graham •

As fun as it is to be cynical about the market movers getting the most attention, today's strength in bond markets really was mostly about Ukraine.  This was apparent for a few reasons, not the least of which being that a majority of the gains occurred during the overnight session following Ukraine-related headlines. 

From those opening levels, Treasuries and MBS are only in modestly stronger territory now, and spent most of the afternoon right in line with them.  ISM Manufacturing--typically a noticeable market mover--had little impact today, suggesting there were bigger considerations at hand.

For now, the positivity for bond markets seems somewhat tentative, as these gains weren't exactly expected after the strong month-end buying seen on Friday.  Once it became apparent that we weren't going to see a quick correction back toward weaker levels, several lenders repriced positively into the PM hours. 

Tomorrow's calendar is the lightest of the week and thus remains sensitive to geopolitical guidance for better or worse. 

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
97-16 : +0-10
FNMA 3.5
101-23 : +0-10
FNMA 4.0
105-02 : +0-08
Treasuries
2 YR
0.3052 : -0.0238
10 YR
2.6012 : -0.0588
30 YR
3.5542 : -0.0398
Pricing as of 3/3/14 4:07PMEST
Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
3:40PM  :  Staying Strong Into Final Hours; Ongoing Positive Reprice Potential
10:23AM  :  Holding Ground Despite Slightly Stronger ISM Manufacturing Data
9:46AM  :  Bond Markets Losing Ground as Flight-to-Safety Unwinds
8:49AM  :  Bond Markets Stronger Overnight, Little-Changed After Data
MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Christopher Stevens  :  "Started talking about Russia off topic and it turned in to a rate conversation. I would be careful of floating past today or tmrw. The problem with geopolitical moves is the bond market will correct far quicker than you can and traders will soon start positioning themselves for the economic releases that start Wed morning."
Victor Burek  :  "the other problem with it is the geopolical issue can be solved at any time, unlike an economic report that is released at a precise time"
John Paul Mulchay  :  "Who is well versed in delayed financing? Putting together a brief presentation and do not want to reinvent the wheel. Any challenges you've seen? "
Sung Kim  :  "jpm - i would think the biggest hurdle might be the requirement that borrowed funds be paid back"
Michael Gillani  :  "MG-With all of the employment data that comes out this week starting with ADP on Wed, how much continued weight will be given to developments in Ukraine do you think? I guess what I'm asking is that if we see stronger employment data this week, capped off with NFP on Fri, will we see bonds really spike back to 2.8-2.9 again or will it be more tamed after the bad last couple of months in combination with foreign drama?"
Brent Borcherding  :  "2.8 or 2.9 would be a pretty aggressive swing from here."
Matthew Graham  :  "excellent question. I think the first snappy move would only get us half-way there regardless of Ukraine"
Jeff Anderson  :  "The markets have seemed pretty comfy when the 10 year is in the 2.70-2.75 range. Once Ukraine calms down I'd expect us to find our way back there."