MBS MID-DAY: The Trend is Not Our Friend

By: Matthew Graham •

Treasury yields moved steadily into the important gap between 2.26 and 2.28 this morning and had been holding their ground just under 2.28 for nearly an hour until breaking higher just after 11:45am.  The technical follow-through has been moderately bad, but disappointingly steady.  2.296 had been a potential turning point, but a weaker-than-expected 30yr TIPS auction just provided an additional measure of weakness, bringing yields up to 2.30.

MBS continue to hold up better than Treasuries during the selling trend, but that's little consolation when prices are down between 3/8ths and 1/2th a point. 

Also unfortunate this morning is that we've seen a reversal in the recent trend of Treasuries holding firmer in the face of rising stock prices.  Today it's Treasury yields that are outpacing gains in equities.  Case in point, stocks have gone no higher than their 11:15am levels, but Treasuries merely paused before resuming the selling.

While this weakness is a bit more than we would have been comfortable with in any supportive scenario, it's still not as abrupt as it might have been in a more bearish scenario.  Translation: today sucks, but all hope is not necessarily lost.

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
100-07 : -0-14
FNMA 3.5
103-14 : -0-11
FNMA 4.0
106-01 : -0-08
Treasuries
2 YR
0.3990 : +0.0370
10 YR
2.2910 : +0.0710
30 YR
3.0610 : +0.0670
Pricing as of 10/23/14 1:19PMEST
Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
12:16PM  :  ALERT ISSUED: Negative Reprices Now More Likely; Things are Getting Serious
11:03AM  :  ALERT ISSUED: Negative Reprice Risk, Just Barely
10:41AM  :  Important Levels Here; Negative Reprice Risk Looming
9:23AM  :  Bond Markets on the Ropes After Weaker Overnight Session
Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "MG2, I think I generally spoke to your question in that update, but let me know if you have a follow up"
Matthew Graham  :  "
MBS Live Update Issued
Important Levels Here; Negative Reprice Risk Looming"
Michael Gillani  :  "MG, when you say crossing the north side of 2.28 will cause pain, is that to be expected to be immediate and cause a snowball sell-off or as long as we would bounce back under today, we'd be okay. Obviously all hypotheticals."
Oliver Orlicki  :  "starting to get very nervous"
Sung Kim  :  "ouch 2.27"
Sung Kim  :  "yet we are only growing at 2-2.5%? something isnt jiving"
Sung Kim  :  "lowest 4 week avg claim since 2000?"
Oliver Orlicki  :  "trend is not our friend"
Matthew Graham  :  "RTRS- US JOBLESS CLAIMS 4-WK AVG FELL TO 281,000 OCT 18 WEEK, LOWEST SINCE MAY 2000, FROM 284,000 PRIOR WEEK (PREVIOUS 283,500)"
Matthew Graham  :  "RTRS- US JOBLESS CLAIMS ROSE TO 283,000 OCT 18 WEEK (CONSENSUS 282,000) FROM 266,000 PRIOR WEEK (PREVIOUS 264,000)"
Sung Kim  :  "today is not so bad given equity performance... we might dodge the bullet today as we have on many many occasions the past several months"