MBS MID-DAY: Treasuries Flat; MBS Slightly Stronger as Stocks Pull Back

By: Matthew Graham •

So far this week, stocks and bonds have generally been moving together again after a bit of disconnection last week.  Equities futures fell gradually overnight after putting in highs at the start of the European session.  Bond yields were slightly higher at the time, and didn't really join in the move lower until the 'pit open' at the CME (820am).  By far and away, that has been the most significant event of today's session for bond markets.

When a market 'open' or 'close' is the most significant event on the radar, it suggests a barren environment of potential market movers.  This could keep the correlation between stock prices and bond yields in focus for the rest of the session.  Indeed, they're currently falling together in lock-step.

MBS are mostly following Treasuries, but have been outperforming somewhat.  Compared to yesterday's opening highs and flat ranges after 10am, MBS have done more to get back to pre-10am levels, currently up 4 ticks at 105-05  (yesterday's highs were 105-06) in Fannie 4.0s and up 4 ticks to 102-01 in Fannie 3.5s.

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
97-30 : +0-03
FNMA 3.5
102-00 : +0-04
FNMA 4.0
105-05 : +0-04
Treasuries
2 YR
0.4225 : +0.0035
10 YR
2.5987 : -0.0123
30 YR
3.3911 : -0.0169
Pricing as of 5/6/14 11:02AMEST
Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
9:11AM  :  Bond Markets Turn Positive After Weaker Overnight Session
Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Christopher Stevens  :  " Just read in WSJ that net shorts in treasury market has reached $1.134 billion. The largest amount since tracking began in 1995. I have attached article but it may be subscriber only. http://mndne.ws/1g56Da6"
Christopher Stevens  :  "MG- I look at this net short number and think wow if rates start dipping there may be some major short covering helping push rates lower faster. Perhaps that's just wishful thinking. "
Josh Stika  :  "Does that mean that people are betting rates will go higher Christopher?"
Oliver Orlicki  :  "they have been betting that for a year now"
Victor Burek  :  "yes Josh, betting treasury prices go lower which is higher yields"
Matthew Graham  :  "by the time short/long positions are reported, they may have already changed."
Matthew Graham  :  "so CS can replace "may be short covering" with "already was rampant short covering last week.""
Christopher Stevens  :  "That was as if 4/29 so maybe the shift took place MG and that was part of the purchasing Friday"
Matthew Graham  :  "no maybe about it! I'm telling you... it absolutely happened!"
Christopher Stevens  :  "So really rates are as low as they can go unless the US economy tanks. We had decent economic #s Friday accompanied by some geopolitical risk and some massive short covering. That brought 10yr yield to the low end of current range. Since then the 10yr has been dancing around 2.60 but can seem to find a dance partner below 2.60 for long. "