MBS MID-DAY: Bond Markets Weaker After Economic Data Prompting Negative Reprices for Mortgage Rates

By: Matthew Graham •

Given the recent adherence to a sideways range in bond markets combined with today's economic data coming in stronger than expected, it's not surprising to see yields moving from a lower rung on the range-bound ladder to the next rung higher.  This move was already a consideration yesterday as 10yr yields lifted off from the 2.60 resistance level.  The next rung on the technical ladder is 2.68, which is where we're currently trading.

Weakness was delivered in 3 installments this morning.  The first came just before the open as overnight trading turned negative in the 7am hour.  The stronger-than-expected Jobless Claims added insult to injury, beating expectations by 11k (304k vs 315k forecast).  Bonds recovered somewhat only to get hit again by stronger Philly Fed data.

MBS had fallen enough in the 10am hour to suggest negative reprice risk, and at least one has already been reported.  The possibility remains as prices are only lower since then.

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
96-28 : -0-11
FNMA 3.5
100-30 : -0-10
FNMA 4.0
104-05 : -0-10
Treasuries
2 YR
0.3911 : +0.0161
10 YR
2.6824 : +0.0454
30 YR
3.4793 : +0.0263
Pricing as of 4/17/14 11:34AMEST
Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
10:18AM  :  ALERT ISSUED: Resilient no More; Bonds Break Supportive Levels; More Reprice Potential
10:07AM  :  ALERT ISSUED: Bond Markets Slightly Weaker after Philly Fed Data; Reprice Risk Already a Consideration
9:23AM  :  Back Near Unchanged Levels Ahead of Stock Open
8:36AM  :  Bond Markets Weaker into Domestic Session and After Stronger Claims 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 ROSE TO 304,000 APRIL 12 WEEK (CONSENSUS 315,000) FROM 302,000 PRIOR WEEK (PREVIOUS 300,000)"
Matthew Graham  :  "RTRS - US CONTINUED CLAIMS FELL TO 2.739 MLN APRIL 5 WEEK (CONS. 2.795 MLN), LOWEST SINCE DEC 2007, FROM 2.750 MLN PRIOR WEEK (PREV 2.776 MLN)"
Victor Burek  :  "pretty solid"
Victor Burek  :  "sure hope 2.66 holds"
tim yazawa  :  "Is the max sellers concession for VA 3%? "
Hugh W. Page  :  "4% I think"
Matt Hodges  :  "our company will allow 4% + 4%, including paying off debt"
Matthew Graham  :  "RTRS - PHILADELPHIA FED BUSINESS CONDITIONS APRIL 16.6 (CONSENSUS 10.0) VS MARCH 9.0"
Victor Burek  :  "mg, next support 2.68, 2.70?"
Matthew Graham  :  "really, you could make a case for several different levels just overhead as we're getting into the central part of the range. Going by retracements, it's 2.68, moving averages, 2.686 for the popular 21-day exponential. 2.705 for the 121 day (6-month in terms of business days). At the end of the day, I don't see these central levels as supportive or resistive, but rather a central point of gravity around which sideways markets have been orbiting. More interesting stuff happens if we break 2.60 or 2.80 meaningfully."