MBS MID-DAY: Bond Markets Romp to Best Levels Amid Risk-Off Trade

By: Matthew Graham •

Despite a much stronger-than-expected Philly Fed report, bond markets didn't lose much ground after 10am.  Earlier in the morning, weaker Housing Starts data helped strengthen an overnight rally.  The original strength is thought to be a factor of increasing geopolitical tensions between Russia and Ukraine.  That said, history suggests remaining skeptical of market movers that seem to be exclusively responsible for a surprise move.

Other factors in play include German Bund Yields making new all-time lows, and the shooting-down of a Malaysian passenger plane near the Russia/Ukraine border.

In the past half hour, Treasuries have stampeded to 2.476 and MBS have shot up another 5 ticks for 10 ticks improvement on the day.  Fannie 3.5s are currently up to 102-13. 

The Malaysian Airliner story is getting the lion's share of attention and credit for the market spikes, but we'd note that the initial wires came out before the move was underway.  Delayed reactions of this magnitude are uncommon, but technically possible. 

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
98-18 : +0-11
FNMA 3.5
102-13 : +0-10
FNMA 4.0
105-19 : +0-08
Treasuries
2 YR
0.4678 : -0.0242
10 YR
2.4782 : -0.0598
30 YR
3.2914 : -0.0566
Pricing as of 7/17/14 11:33AMEST
Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
10:08AM  :  Strong Philly Fed Data Reinforces Bounce Toward Weaker Levels
9:37AM  :  Bond Markets Stronger Overnight, and Another Boost From Weak Housing Data
Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "Good question CH. The most recent turning point coincided with the release of June prepayment speeds, which surprised markets a bit (faster than expected). This occurred right in line with relatively strong MBS performance vs Treasuries and seems to have kicked off a move back to the other side of the spread range (which was pretty fast, but also in a range that's historically narrow at the moment)."
Chris Hooker  :  "Anyone have any clue as to why MBS are underperforming TSY this week?"
Matthew Graham  :  "RTRS- US JOBLESS CLAIMS FELL TO 302,000 JULY 12 WEEK (CONSENSUS 310,000) FROM 305,000 PRIOR WEEK (PREVIOUS 304,000)"
Victor Burek  :  "wow...yet home builders were much more optimistic yesterday"
Matthew Graham  :  "RTRS - US JUNE HOUSING STARTS 893,000 UNIT RATE, LOWEST SINCE SEPT 2013 (CONSENSUS 1,018,000) VS MAY 985,000 UNITS (PREV 1,001,000 UNITS)"
Matthew Graham  :  "RTRS- US JUNE HOUSING STARTS -9.3 PCT VS MAY -7.3 PCT (PREV -6.5 PCT)"