MBS MID-DAY: Proof that European Growth Concerns Are The Only Game in Town Today

By: Matthew Graham •

Today has been the calmest day of the week so far, which isn't saying too much considering the previous 3 days were the most volatile of the year.  10yr yields drifted as low as 2.12 overnight and were then jolted higher to 2.21 after comments from European Central Bank governor Coeure around 4am. 

This lets us know that markets are indeed freaked out about "global growth concerns"--the catchphrase of the week.  Reason being, the Coeure comments were about asset purchases happening soon.  Normally that would be positive for bond markets.  The fact it was negative suggests that "global growth concerns" had been hitting stocks and that the money had been finding its way into bond markets.  The promise of impending liquidity would ease those concerns and unwind some of that "flight-to-safety" momentum.

Bonds recovered into the morning hours, but resumed selling when US traders began their day.  Stronger Housing Starts data added to the weakness.  By 11:30, however, European markets closed and it was game-on for bond markets again.  This showed us just how clearly today's trading has been dictated by "global growth concerns."  Treasuries have followed European equities more than anything else, and were finally given permission to rally after the European 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
100-23 : +0-03
FNMA 3.5
103-24 : +0-03
FNMA 4.0
106-09 : +0-02
Treasuries
2 YR
0.3670 : +0.0277
10 YR
2.1830 : +0.0315
30 YR
2.9570 : +0.0220
Pricing as of 10/17/14 1:21PMEST
Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
11:14AM  :  ALERT ISSUED: Flirting with Reprices for the Worse
10:03AM  :  Treasuries Weaker After Data; MBS Closer to Unchanged
Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Joshua Cederlof  :  "Just read the "why focus on the 10yr?" link. Great info MG! Also, do you have any published poetry? It was beautiful! :)"
Matthew Graham  :  "Keep in mind that moves like Wednesday's aren't the product of human beings making a conscious decision to trade those levels, but rather the forced buying associated with short-covering and automatic algorithmic trading triggered by technical levels."
Matthew Graham  :  "This mostly: Why so much focus on 10yr Treasuries if this is an MBS Site?"
Joshua Cederlof  :  "Thanks MG. Any simple explanation for the recent MBS weakness? I need to read up more on what drives one over the other."
Matthew Graham  :  "MBS are STILL underperforming relative to early October."
Matthew Graham  :  "Nature of the beast for Treasuries to lead the charge on the way down and for MBS to outperform on the way up."
Joshua Cederlof  :  "On the bond subject, why the big spread between MBS and Treasuries this morn?"
Matthew Graham  :  "RTRS - US SEPT HOUSING PERMITS 1,018,000 UNIT RATE (CONSENSUS 1,029,000) VS AUG 1,003,000 UNIT RATE (PREV 1,003,000 UNITS)"
Matthew Graham  :  "RTRS - US SEPT HOUSING STARTS 1,017,000 UNIT RATE (CONSENSUS 1,004,000) VS AUG 957,000 UNITS (PREV 956,000 UNITS)"
Victor Burek  :  "COEURE SAYS ECB WILL START WITHIN DAYS TO BUY ASSETS"
Victor Burek  :  "I haven't seen anything either...really started at 4am"
Jeff Anderson  :  "I missed whatever has equities going today. Any headlines?"