MBS MID-DAY: US Bond Markets Reluctantly Stronger as Europe hits Another All-Time Low

By: Matthew Graham •

When we reference "European bond markets," we're talking about the undisputed benchmark for the Eurozone: German Bunds.  It's important to keep in mind that Germany is the political and economic center of the EU, and by an staggeringly wide margin. 

Germany Bund yields hit another new all-time low today.  US Treasuries once-again followed the move and were once-again reluctant to move forcefully through resistance levels around 2.44.  It was only after a newswire went viral about a Ukrainian fighter jet being shot down that yields had enough momentum to get into 2.43's.  They're just now back to 2.44.

It could be worse for Treasuries though...  They could be MBS!  The mortgage market wants as little of this geopolitical risk business as possible and it shows in the even more tepid improvements.  Fannie 3.5s are up 5 ticks on the day while Treasury prices are up 10 ticks. 

Jobless Claims data did almost nothing to push bond markets weaker.  Instead, it was ECB President Draghi's press conference that kept bonds in the green, not to mention the overall rally momentum coming out of Europe.  How long can 10yr US Treasuries hold out before pushing down to 2.40?  And will we see another series of defiant bounces there as we have in the 2.44-2.47 neighborhood?  A) longer than we would have thought and B) probably.

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
98-26 : +0-08
FNMA 3.5
102-17 : +0-06
FNMA 4.0
105-21 : +0-05
Treasuries
2 YR
0.4440 : -0.0160
10 YR
2.4350 : -0.0390
30 YR
3.2420 : -0.0340
Pricing as of 8/7/14 12:16PMEST
Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
9:24AM  :  Bond Markets Holding Just Inside Positive Territory After Data and Draghi
Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "Indeed there was a big block sale in TSY futures just now, theoretically when this happens around 9:30, it's setting up for some trading goal that depends on cash equities being open. Today however, it's not readily apparent in the major averages (usually we see a corresponding move in the S&P)."
Victor Burek  :  "same thing happened yesterday when stock trading opened"
Oliver Orlicki  :  "why the drop?"
Matthew Graham  :  "looks like 'tempered' to me"
Andy Pada, Jr.  :  "So has the market taken the reduced jobless claims into account or has that better number been tempered by Draghi/ECB?"
Matthew Graham  :  "I think we already have the two big things we needed from Mario today: "yes, we're still moving forward on that bond-buying stuff," AND "yes, we're planning on keeping the deposit rate in negative territory." "
Andy Pada, Jr.  :  "do we look for change in in language with Mario that we do with the Fed?"
Victor Burek  :  "seems to me just more of the same ffrom Draghi..all talk"
Victor Burek  :  "10yr bund hit 1.08 earlier, now back to 1.10"
Matthew Graham  :  "RTRS - DRAGHI - ECB INTEREST RATES WILL REMAIN AT PRESENT LEVELS FOR AN EXTENDED PERIOD OF TIME "
Matthew Graham  :  "RTRS - US JOBLESS CLAIMS 4-WK AVG FELL TO 293,500 AUG 2 WEEK, LOWEST SINCE FEBRUARY 2006, FROM 297,500 PRIOR WEEK (PREVIOUS 297,250) USJOB=ECI"
Matthew Graham  :  "RTRS - US JOBLESS CLAIMS FELL TO 289,000 AUG 2 WEEK (CONSENSUS 305,000) FROM 303,000 PRIOR WEEK (PREVIOUS 302,000) USJOB=ECI"