MBS RECAP: Bonds Brought Back to Positive Territory by Oil and Greek Drama

By: Matthew Graham

Unlike yesterday, which had a decent start and crappy conclusion, today's trading session began with bond markets at their weakest levels in more than 2 weeks, but ended with a strong move back into positive territory.  Better yet, the motivation for the latest, strongest move is centered in the Eurozone, which hasn't even had a chance to react.  In other words, most of the positivity at the moment stems from domestic traders anticipating the Eurozone reaction.  In these cases, domestic traders tend to undershoot.

Bond markets hinted at their willingness to bounce back as they visibly opted to hold technical support during the first half of the day.  While MBS and Treasuries were both in negative territory, 10's respected the 1.84% inflection point and Fannie 3.0s held above 102-20. 

Ironically, European markets were part of the reason for the weakness overnight.  As soon as they closed, domestic Bond markets started to perk up a bit.  A massive slide in oil prices provided a bit of a nudge, but the biggest development was the aforementioned Greek Drama. 

Long story short, the ECB cut off Greece's funding lines effective 2/11, citing the uncertainty surrounding Greece's austerity program.  Market participants figured the D-day would be 2/28, so it's a forceful message to Greece to make a decision on exiting the Eurozone or playing ball with austerity.  Depending on whatever headlines come out of Greece overnight, tomorrow's reaction could be huge in either direction. 


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
103-02 : +0-06
FNMA 3.5
105-14 : +0-04
FNMA 4.0
107-01 : +0-02
Treasuries
2 YR
0.4840 : -0.0320
10 YR
1.7400 : -0.0580
30 YR
2.3370 : -0.0500
Pricing as of 2/4/15 4:38PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
3:53PM  :  ECB Calls Down the Thunder on Greece; Flight to Safety Ensues
2:54PM  :  Technicals, Oil, and European Close Help Bonds Bounce, but Impact Could Be Limited
1:05PM  :  ALERT ISSUED: Very Slight Negative Reprice Risk
8:36AM  :  Bond Markets Showing Their Hand Regardless of Data

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Jeff Anderson  :  "I hate getting the "You know where the door is" speech."
Matthew Graham  :  "
MBS Live Update Issued
ECB Calls Down the Thunder on Greece; Flight to Safety Ensues"
Hugh W. Page  :  "Is the ECB telling Greece to play by the rules or get out? Am I reading the right?"
Ted Rood  :  "sure hope that doesn't spur a massive flight to safety."
Matthew Graham  :  "Dear Greece, You want to play shell games? Here's what's under our shells. Sincerely, ECB"
Matthew Graham  :  "RTRS- ECB SAYS LIQUIDITY NEEDS OF AFFECTED EUROSYSTEM COUNTERPARTIES CAN BE SATISFIED BY THE RELEVANT NATIONAL CENTRAL BANK"
Matthew Graham  :  "RTRS- ECB SAYS SUSPENSION IS IN LINE WITH EXISTING EUROSYSTEM RULES, SINCE IT IS CURRENTLY NOT POSSIBLE TO ASSUME A SUCCESSFUL CONCLUSION OF THE PROGRAMME REVIEW"
Matthew Graham  :  "Here's the bounce: RTRS - ECB SAYS GOVERNING COUNCIL LIFTS CURRENT WAIVER OF MINIMUM CREDIT RATING REQUIREMENTS FOR MARKETABLE INSTRUMENTS ISSUED OR GUARANTEED BY GREECE"
Victor Burek  :  "agreed, that's why people buying german bunds at .30"
Christopher Stevens  :  "ask Buffet about Coke and IBM...I bet he would have rather held 30YR bonds"
Matthew Graham  :  "The big problem I have with soooooo much of the bond rhetoric out there is that people are only looking at the YIELD and not thinking about the rate of return on potential price appreciation. "
Matthew Graham  :  "30yr bond was a terrific investment in 2014. It still may be."
Matthew Graham  :  "RTRS- WARREN BUFFETT SAYS "LAST THING" HE WOULD WANT TO BUY IS A 30-YEAR GOVERNMENT BOND - FOX BUSINESS"
Bryce Schetselaar  :  "Streamline is grandfathered in"
Scott Lushing  :  "what happens if you want to refinance someone who did an FHA loan before the loan limits dropped? can you do an fha to fha refinance above the current limits?"
Jeff Anderson  :  "Oil getting smushed today."