MBS RECAP: Bond Markets Unable To Sustain Corrective Pace

By: Matthew Graham

Today started off well enough for MBS and Treasuries.  Although the first part of the overnight session was a bit weaker, European trading helped get us back in line with unchanged levels in the morning.  From there, the morning's only significant economic data--New Home Sales--fell on deaf ears despite being significantly stronger than expected. 

Invariably, some people will make the connection between higher rates and stronger data today, but it's just not even close to being the case.  Bond market IMPROVED after that data, and hit the best levels of the day a full 40 minutes later.  It would be over an hour before we even returned to pre-data levels in Treasuries. 

So what's moving markets then?

That question has to be answered with a grain of salt today as trading activity was fairly light.  It didn't take much to get things moving and there are several candidates for motivation.  These include:

1. The stock lever (i.e. stock prices and bond yields moving together).  We talked about this in-depth in this morning's Day Ahead.

2. European Market Close and 5yr Auction.  Europe is like the US in that there's an initial close for stocks and a later closer for bond markets.  That later close is right at 1pm--same as the 5yr Auction.  Either of these events could have contributed to the turning point at 1:30pm.

3. Corporate bond pricings picked up at 1:30.  As we've recently discussed, firms offering new bonds can hedge their risk during the subscription process by selling Treasuries when the deal is initially priced.  Roughly $5bln in corporate debt was priced today.

4. Technicals.  We'll talk more about this in tomorrow morning's Day Ahead, but bond markets met some technical resistance at this morning's best levels.  The bounce could have been a done deal from then on, but could have been waiting for the 5yr auction before getting too crazy.


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
98-09 : -0-06
FNMA 3.5
101-31 : -0-05
FNMA 4.0
105-06 : -0-04
Treasuries
2 YR
0.5910 : +0.0110
10 YR
2.5660 : +0.0330
30 YR
3.2800 : +0.0290
Pricing as of 9/24/14 5:36PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
2:23PM  :  ALERT ISSUED: Incremental Increase in Reprice Risk as MBS Push New Lows
1:45PM  :  ALERT ISSUED: On the Edge of Negative Reprice Risk; Emphasis on 'Edge'
1:13PM  :  5yr Auction Much Weaker Than Expected; MBS Holding Above Lows
11:40AM  :  Bond Markets at Weakest Levels; 5yr Leads
9:14AM  :  Bond Holding Near Yesterday's Best Levels After Strong European Session

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Kenneth Crute  :  "50% of the agents I speak with say ZIllow adds quite a bit to their piplline the other 50% attribute Zillow to an empty bank account. Not sure what the difference is, but there you go "
Kenneth Crute  :  "in terms of results from Zillow... meh... but in terms of solidifying relationship with the Realtor, its probably worth the investment "
Hugh W. Page  :  "I attended a Realtor Assoc. Annual Breakfast this morning where a top executive from Trulia gave a presentation. It was a total sales presentation to realtors and why they should be on Trulia or Zillow. Almost no mention of mortgage lenders although not surprising given the audience."
Andy Pada, Jr.  :  "wondering specifically about the comarketing with agents"
Tim McNerney  :  "yes AP...there is a mortgage marketplace"
Andy Pada, Jr.  :  "do home purchasers look on zillow for mortgage needs?"