MBS MID-DAY: Geopolitical Risk Trumps Data, Greatly Benefiting Bond Markets

By: Matthew Graham •

Until 11:11am, the day may well have been about the fairly tepid reaction to stronger economic data.  Treasuries had traded a super narrow range overnight, resulting in unchanged levels at the open for themselves and MBS.  Jobless Claims were lower than expected and Retail Sales didn't have much to say, coming in just slightly stronger, but with even bigger negative revisions.

Bond markets weakened just a bit, but held their ground quite well.  MBS never came close to revisiting yesterday's opening levels and Treasuries put in a good supportive bounce right in line with yesterday's high yields.

Then the headlines hit.

11:11 - U.S. SECRETARY OF STATE KERRY SAYS IF REFERENDUM ON UKRAINE'S CRIMEA GOES AHEAD, THERE WILL BE A 'SERIOUS SERIES OF STEPS' ON MONDAY FROM U.S. AND EUROPE AGAINST RUSSIA

11:27 - KERRY: THERE ARE CONTINGENCIES IN PLACE IN CASE RUSSIAN FORCES MOVE FARTHER EAST INTO UKRAINE, HOPES TO AVOID THAT BUT 'NO TELLING THAT WE CAN'

Markets reacted noticeably, and were potentially already on edge about this weekend's referendum.  Both MBS and Treasuries surged to the best levels of the week, with the gains helping Treasuries particularly as they triggered further short-covering.  We've already seen quote a few positive reprices and will likely see more this afternoon.

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
96-32 : +0-16
FNMA 3.5
101-04 : +0-13
FNMA 4.0
104-16 : +0-10
Treasuries
2 YR
0.3580 : -0.0080
10 YR
2.6652 : -0.0608
30 YR
3.6094 : -0.0586
Pricing as of 3/13/14 12:29PMEST
Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
11:58AM  :  ALERT ISSUED: Prices Surge on Ukraine/Russia Headlines; More Reprice Potential
10:29AM  :  MBS Move Into Positive Territory; Some Reprice Potential Already
8:52AM  :  Bond Markets Weaker Following Stronger Economic Data
Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "RTRS- US JOBLESS CLAIMS FELL TO 315,000 MARCH 8 WEEK (CONSENSUS 330,000) FROM 324,000 PRIOR WEEK (PREVIOUS 323,000)"
Matthew Graham  :  "RTRS- US CONTINUED CLAIMS FELL TO 2.855 MLN (CONS. 2.900 MLN) MARCH 1 WEEK FROM 2.903 MLN PRIOR WEEK (PREV 2.907 MLN)"
Matthew Graham  :  "RTRS- US FEB RETAIL SALES EX-AUTOS +0.3 PCT (CONS +0.2 PCT) VS JAN -0.3 PCT (PREV UNCHANGED)"
Matthew Graham  :  "RTRS - U.S. FEB IMPORT PRICES +0.9 PCT, LARGEST RISE SINCE FEB 2013 (CONSENSUS +0.4 PCT) VS JAN +0.4 PCT (PREV +0.1 PCT)"
Victor Burek  :  "were those increases due to oil?"
Matthew Graham  :  "Mostly fuel-related "
Matthew Graham  :  "RTRS- U.S. FEB PETROLEUM IMPORT PRICES +4.4 PCT, LARGEST RISE SINCE AUG 2012, VS JAN +0.6 PCT"
Victor Burek  :  "Barclays trimming its Q1 GDP tracking forecast from 2.3% to 2.2%, and now it is Goldman's turn which just cut its latest Q1 GDP forecast from 1.7% to 1.5%."
John Sheadel  :  "Anything in particular going on, or are we just in a pleasant tradeflow stream right now?"
Victor Burek  :  "this weekend is a pretty big moment for the Ukraine issue"
Matt Shibata  :  "JRS, equity markets are dropping and people will get less long going into Ukrainian elections on Sun, IMO"
Matthew Graham  :  "RTRS- U.S. SECRETARY OF STATE KERRY SAYS IF REFERENDUM ON UKRAINE'S CRIMEA GOES AHEAD, THERE WILL BE A 'SERIOUS SERIES OF STEPS' ON MONDAY FROM U.S. AND EUROPE AGAINST RUSSIA"
Matthew Graham  :  "RTRS- KERRY: THERE ARE CONTINGENCIES IN PLACE IN CASE RUSSIAN FORCES MOVE FARTHER EAST INTO UKRAINE, HOPES TO AVOID THAT BUT 'NO TELLING THAT WE CAN'"
Matthew Graham  :  "definitely a market reaction to these headlines "