MBS RECAP: Massive Sell-Off in Stocks but no Rally in Bonds

By: Matthew Graham •

It's not often you'll see the S&P down over 30 points with less than 1bp of day-over-day movement in 10yr yields, but that's where we're heading out today.  Things might have been worse for Treasuries, however, had it not been for the stock selling, which prompted some asset reallocation ahead of month-end (sell stocks/buy bonds).

In reality, both sides of the market are disheartened by yesterday's super strong GDP reading because it drives the point home that Fed accommodation is likely on its last legs.  Since the prodigious staying power in stocks is at least mostly a factor of Fed policy, it's no surprise to see them lower.  Sure, earnings season and geopolitical headlines might be contributing, but the day's movements have much more to do with a big-picture shift and some month-end frenzy.

Bond markets, for their part, returned to the previously important inflection point of 2.57 in 10yr yields--as good a place as any to approach and digest tomorrow's jobs data.  That leaves them roughly mid way between the two important levels: 2.47 and 2.66.  We could see either one tomorrow.

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
97-31 : -0-03
FNMA 3.5
101-28 : -0-02
FNMA 4.0
105-04 : -0-01
Treasuries
2 YR
0.5315 : -0.0315
10 YR
2.5597 : +0.0077
30 YR
3.3184 : +0.0084
Pricing as of 7/31/14 5:04PMEST
Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
3:17PM  :  ALERT ISSUED: Post-3pm Volatility Pushing MBS Back Down; Negative Reprice Risk Increasing
2:52PM  :  Holding Ground Now After Earlier Hiccup
2:20PM  :  ALERT ISSUED: MBS Off Highs, Bond Markets Pulling Back Into 3pm Close
11:36AM  :  MBS Back into Positive Territory; Broader Bond Market Still on Fence
9:56AM  :  Chicago PMI Much Weaker Than Expected; Bond Markets Barely Budge
8:36AM  :  ALERT ISSUED: No Help From Jobless Claims, Bond Markets Consider a Melt-Down
MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Victor Burek  :  "TrimTabs Investment Research shows a much rosier picture for July. This report showed that the United States added a whopping 306,000 jobs in July. "
Matthew Graham  :  "On a serious note Josh, a negative surprise would be quite a surprise for markets. I think there's a lot of faith in the forecast. Almost every other employment indicator from July was solid. The ones that weren't solid were only slightly off or distorted for specific reasons. "
Matthew Graham  :  "If overall job creation is higher than expected, it could be challenging for rates to improve. "
Josh Olson  :  "Whats the overall thought on tomorrow?"
Matthew Graham  :  "nice MD. Thank you. There is some cool new functionality as well, especially with the custom alerts."
Michael Dormer  :  "MG: The new layout / options on this site are a huge upgrade on an already great service. It's the topic of my sales meeting next Monday. Great stuff."
Matthew Graham  :  "I think if you put the available data into a purely objective equation right now, risk outweighs reward for floating in the short term. The crazy thing about NFP though is that it always reserves the right to do something unexpected and completely crush objective reasoning. "