MBS MID-DAY: Bond Markets Resilient After Shaky Morning

By: Matthew Graham •

After the strong move lower in rates through yesterday morning and a disconcertingly sharp pull-back yesterday, possibilities for today were diverse.  It wouldn't have been a surprise to see rates correct a bit higher or to move back toward yesterday's lows, but neither of those extremes have shown up today.

Instead, we're left with what is probably the most staid scenario where trading levels are simply orbiting around yesterday's latest levels.  With a low of 2.45 and a high of 2.49, the consolidation around the important 2.47 inflection point in 10yr yields borders on "scripted." 

MBS have been doing a somewhat similar dance around 102-29 in Fannie 3.5s, though they 'freaked out' a bit more into this morning's weakest run.  10am provided a solid bounce, though, bringing them right back to opening levels. 

While some correlation could be argued with the economic data, bond market reactions have been brief.  Very likely, we're seeing the default game-plan for bond market trading today and data would only have mattered had it been wildly far from forecasts.  Even then, it still might not have mattered in the current environment (case in point: crappy GDP yesterday and the day ends with bond market losses). 

That's not to say data can't influence the short term ebbs and flows, simply that there are bigger considerations at the moment.  Today's willingness on the part of bond markets to orbit these long-term inflection points is real-time evidence that we're hunkering down in anticipation of the biggest of those considerations, arriving late next week.

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
98-27 : -0-01
FNMA 3.5
102-29 : -0-01
FNMA 4.0
105-27 : +0-01
Treasuries
2 YR
0.3750 : +0.0040
10 YR
2.4679 : +0.0209
30 YR
3.3195 : +0.0165
Pricing as of 5/30/14 12:10PMEST
Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
10:20AM  :  Still in Weaker Territory, but Noticeably Trying to Bounce
9:52AM  :  ALERT ISSUED: Bond Markets Continue Weaker; Chicago PMI Stronger Than Expected
9:33AM  :  ALERT ISSUED: Bond Markets Starting to Slip
9:01AM  :  Bond Markets Improve Temporarily After Weak Consumer Spending Data
Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "RTRS - US APRIL PERSONAL SPENDING -0.1 PCT (CONSENSUS +0.2 PCT), FIRST DECLINE SINCE APRIL 2013, VS MARCH +1.0 PCT (PREV +0.9 PCT)"
Matthew Graham  :  "RTRS- US APRIL REAL CONSUMER SPENDING -0.3 PCT VS MARCH +0.8 PCT (PREV +0.7 PCT)"
Hugh W. Page  :  "All next week could be huge . . . let's say ECB disappoints on more easing, jobs are strong and hours worked and earnings up. That would be a recipe for a sell of in bonds in the short term wouldn't it?"
Jeff Anderson  :  "I'd think so, Hugh. I think Part rate will be watched again."
Hugh W. Page  :  "Great Day Ahead MG. Awesome detailed recap of the where we've been and possibly why. To me, it simply points that we have more upside risk here than probable downward pressure but that's my take."
Victor Burek  :  "so with negative consumption, that doesn't bode well for GDP..not sure where people think this massive rebound is coming from"
Hugh W. Page  :  "It's a mystery to me as well. I think the next 3 to 5 mos will be the most important mos for the economy in awhile. QE ending and the prospect of higher policy rates, expectations of faster jobs and growth, ECB easing (maybe), Japan imploding, and China as a wild card. What can go wrong ?"
Victor Burek  :  "the only explanation I have for it, is the talking heads, the economists they speak to are all rich, so things are great for them so they think it is great for everyone"
Jeff Anderson  :  "Definitely a disconnect there, VB."
hunter16  :  "VB, I think your point is legitimate. When I look at applications each day, your average guy is just struggling to get by. There is not a whole lot of disposable income and when you combine that with the fear of what has happened to our economy over the last 5 years, it is a recipe for caution and lack of REAL confidence,"
Christopher Stevens  :  "holding 2.47 this morning seems like a decent show of strength after the recent rally. Have to assume the 10YR was/is a tinch overbought"