Even the confirmation of a 4%+ GDP and the strongest read on Pending Home Sales in 11 months were not enough to wrest control of bond market momentum from Europe. Particularly, market participants widely expect the European Central Bank (ECB) to announce some form of quantitative easing (QE) by March 2015. The ECB has not been shy about telegraphing that likelihood and markets have not been shy about pricing it in. It's dominated bond market momentum since early April and continues to make domestic economic data look irrelevant for Treasuries and MBS.
After all, ALL THREE of this morning's economic reports were stronger than expected, yet MBS are up 5 ticks and 10yr yields are down 2.5bps. Both are at the best levels in weeks and near their best levels in over a year. Bottom line, we simply have yet another day where a majority of the movement has taken place by the open followed by relative stability during domestic hours. If we do see some volatility today, it will most likely be after the 1pm Treasury auction (last of the week), and the European bond market close.
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 99-18 : +0-06 | FNMA 3.5 102-30 : +0-04 | FNMA 4.0 105-30 : +0-04 |
| Treasuries | 2 YR 0.5120 : -0.0040 | 10 YR 2.3360 : -0.0250 | 30 YR 3.0690 : -0.0400 |
| Pricing as of 8/28/14 11:41AMEST |
Morning Reprice Alerts and Updates
9:30AM : Dumpster Diving for Excuses to Rally; Paradoxically Stronger Following GDP
Live Chat Featured Comments
Victor Burek : "just hoping the market isn't pricing that in now...and when they don't we sell off"
Victor Burek : "i agree"
John Tassios : "ECB not ready yet for implementing QE at next meeting"
Matthew Graham : "next week? probably the expectations have more to do with how it's treated by Draghi in the press conference. It doesn't seem like there's widespread expectation that any triggers are actually pulled. But of course I do think the broader rally has much to do with QE expectations in general, not to mention the weak underlying economic conditions that necessitate it."
Victor Burek : "mg...i asked earlier you might have missed..do you think any of our rally is based on market expecting QE from ECB next week?"
Matthew Graham : "ABM, let's say you sell apples to a certain populace that enjoys fruit--apples and oranges in particular. Then lets say a central bank steps in a buys all your competitor's oranges. What will happen to the price of your apples?"
Sung Kim : "the indirect impact is pretty substantial, but it depends on the size of their QE..."
aaron meyer : "could you further explain how if they only buy European Securities and not ours why we continue to rally?"
Matthew Graham : "European"
aaron meyer : "MG would they only buy European Securities or potentially some of ours?"
Matthew Graham : "RTRS - REUTERS POLL-75 PCT CHANCE ECB WILL CONDUCT QUANTITATIVE EASING BY PURCHASING ASSET-BACKED SECURITIES"
Matthew Graham : "RTRS- U.S. JULY PENDING HOME SALES INDEX +3.3 PCT, HIGHEST SINCE AUG 2013 (CONSENSUS +0.5 PCT) TO 105.9 - NAR"
Ross Miller : "DK, that is fine."
Daniel Kramer : "condo question, if a condo project, with only 8 units in it, shows on the budget they line item for over 10% of income for reserves, BUT, they do not put that money into a dedicated reserve bank account, they put it into their general operating account, is that ok or against FNMA warrantble rules?"
Andy Pada, Jr. : "All good...MBS higher regardless of the revision."
Matthew Graham : "RTRS - US JOBLESS CLAIMS FELL TO 298,000 AUG 23 WEEK (CONSENSUS 300,000) FROM 299,000 PRIOR WEEK (PREVIOUS 298,000)"
Matthew Graham : "RTRS - US PRELIM Q2 GDP +4.2 PCT (CONSENSUS +3.9 PCT), PREV +4.0 PCT; FINAL SALES +2.8 PCT (CONS +2.5 PCT), PREV +2.3 PCT"