MBS RECAP: Trading Day Reminds us It's All About Europe

By: Matthew Graham

When you get an instantaneous 7bp rally in 10yr yields following an FOMC communication, only to immediately bounce on the preexisting trendline and continue in the same direction as before, you know that bonds aren't paying the normal level of attention to the Fed.  That's nothing new, but it was more than fair to wonder about it yesterday afternoon. 

Today cleared up any doubts.  It's all about Europe, and the thesis is the same as it has been.  We're waiting on European bond markets to commit to a direction after having flat-lined in February.  For some market participants, that flat-line is terrifying.  They're worried it means that European bonds are getting ready to bounce higher as soon as Greece is cleared up.  And considering that US bonds are where they are because of the massive, ongoing European strength, US bond traders are more terrified still. 

In other words, and to reiterate the caveat I offered with much of 2014's uncanny rally: when Europe finally turns the corner, the party is over.  The 2nd part of that caveat is that we won't really know when Europe turns the corner without the benefit of hindsight.  Some of the "freaking out" that's going on in US bond markets is due to the fact that February is currently still eligible to be the scene of the bounce.  So we watch closely and wait patiently for Europe to make a move, understanding that things are tense in the meantime.  Trading levels reflect this nervous anticipation perfectly.


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
101-07 : -0-08
FNMA 3.5
104-10 : -0-06
FNMA 4.0
106-18 : -0-05
Treasuries
2 YR
0.6210 : +0.0160
10 YR
2.1220 : +0.0370
30 YR
2.7410 : +0.0250
Pricing as of 2/19/15 6:15PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
1:33PM  :  ALERT ISSUED: Negative Reprices Now More Likely
12:55PM  :  ALERT ISSUED: Edging Toward Negative Reprice Risk Territory
10:10AM  :  'Something' Changed Overnight for Greece, but No One Can Explain It

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Joshua Cederlof  :  "Problem is, don't pay your debt with Russia and they invade your country..."
Matt Hodges  :  "Greece is joining the Asian Union.. with a unified currency?"
Joshua Cederlof  :  "thinly veiled threats"
Ted Rood  :  ""screw you, ECB, we have options"?"
Matthew Graham  :  "RTRS- GREEK PM SAYS I BELIEVE GREECE CAN BE A SIGNIFICANT GATEWAY FOR CHINA IN TO EUROPE"
Victor Burek  :  "china and Russia be happy to help Greece"
Matthew Graham  :  "ahh.. I see what you did there."
Matthew Graham  :  "RTRS- GREEK PM SAYS THERE IS ROOM TO BOOST COOPERATION BETWEEN CHINA AND GREECE IN TRANSPORT, INFRASTRUCTURE"
Joshua Cederlof  :  "How many people/ways can they come up with to say the same thing over and over again. Seriously irritating."
Victor Burek  :  "all they have to do is agree to current bailout terms, despite promising they would not"
Matthew Graham  :  "RTRS - ECB'S WEIDMANN - WAIVER TO ALLOW GREEK BONDS IN STANDARD ECB LENDING OPERATIONS COULD BE REINTRODUCED IF CONDITIONS MET"
John Tassios  :  "I feel we will see foreign buyers coming in sooner or later to buy our TSY's. Dovish FED min stopped the bleeding for now, I agree with MG on that part. Still a lot of headwinds to world growth,deflation, deleveraging. Give it time. I am still bullish on US TSY's for 2015. Just my opinion only on this comment"