MBS MID-DAY: Bonds Holding Ground in Slightly Weaker Territory

By: Matthew Graham

Domestic economic data, as expected, was passed over in favor of more meaningful forces.  At the moment, those forces include Eurozone economic conditions and the broad-based flight to safety that helped bond markets and hurt risk assets yesterday.  That flight-to-safety has generally taken a step back today after an important Eurozone inflation report showed core inflation was slightly higher than expected.  This outweighed the drop into negative territory in headline inflation.  All that having been said, German 10yr yields still closed below 0.50--territory they only entered for the first time this week.

All told, the selling pressure has been far more modest than history would suggest.  In the past when bond markets have rallied for 7 days in a row culminating in a big move to long-term lows, the following day stands a better than average chance to see a big move in the other direction.  While we are indeed moving in the other direction, it's not exactly 'big.'  Fannie 3.0s are down only a quarter of a point and 10yr yields are up less than 4bps--neither of which is outside yesterday's trading range.


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
102-12 : -0-08
FNMA 3.5
105-03 : -0-06
FNMA 4.0
107-05 : -0-04
Treasuries
2 YR
0.6210 : -0.0080
10 YR
1.9780 : +0.0400
30 YR
2.5400 : +0.0410
Pricing as of 1/7/15 12:27PMEST

Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
9:37AM  :  ALERT ISSUED: Quick Heads-Up Regarding Early Potential Reprice Risk
9:06AM  :  Bond Markets Attempting to Hold Yesterday's Range; Confirming What Matters

Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Christopher Max NMLS #8705  :  "Very cool. 07-Jan-2015 10:29 - U.S. PRESIDENT OBAMA TO ANNOUNCE 0.5 PERCENTAGE POINT REDUCTION OF FHA LOAN PREMIUMS TO 0.85 PERCENT ON THURSDAY -BLOOMBERG "
Chris Hooker  :  "JM/CS/IS....I'm being told by our investors that Fannie CU is primarily about data integrity....if you aren't getting a red flag on your DU for excessive value now, you will be fine then since the flagged value is already being ran against the database. So unless someone fudged GLA, comp distance, quality/condition rating....shouldn't be an issue and should score fine. Anyone else hearing otherwise?"
Victor Burek  :  "rates at almost 2 year lows, and we have had the longest run of +200k jobs created per month...don't think market really cares about jobs created"
Matthew Graham  :  "" ADP employment data at 8:15am, which seems like it can't help but have less of an impact than normal given the fact that we already know payroll creation is doing fine.""
Jude Bridwell  :  "Good number, interesting reaction"
Matthew Graham  :  "RTRS- US ADP NOVEMBER PAYROLL CHANGE REVISED TO 227,000 FROM 208,000"
Matthew Graham  :  "RTRS- REUTERS CONSENSUS FORECAST FOR ADP PAYROLL CHANGE FOR DEC WAS FOR INCREASE OF 226,000 JOBS"
Matthew Graham  :  "RTRS- ADP NATIONAL EMPLOYMENT REPORT SHOWS U.S. EMPLOYMENT INCREASED BY 241,000 PRIVATE SECTOR JOBS IN DECEMBER"