MBS MID-DAY: Another Calm Morning; MBS Outperforming Treasuries

By: Matthew Graham

A frequent topic of interest over the past few years--and especially recently--is the trickle down effect from European bond markets to mortgage rates.  Treasuries typically react more to whatever is going on in Europe, and MBS are another degree removed. 

More often than not, Europe has been leading the charge toward lower rates, which means MBS and mortgage rates have seen the least benefit of the three.  But those tables have turned for the time being, at least for the past two days.  During that time, European bond markets have weakened, and domestic bond markets have been doing a better job of holding their ground. 

On both days, a sharp move higher in European yields has translated into a timid move higher in US yields.  In today's example, it was just enough to take Treasuries into weaker territory on the day, but with their extra degree of insulation, MBS have remained in positive territory.  The other way to look at the MBS outperformance would simply be to note the relative stability in Treasuries' trading range in conjunction with the general truth that MBS appreciate stability and tend to outperform when Treasuries remain mostly flat.

The morning's data has done little to inspire any movement.  Even then, there's not really enough movement to say it's been inspired by anything.  For the record though, CPI was slightly stronger than expected at the 'Core' (factors out food and energy) and right in line with expectations at the headline level (includes everything).  New Home Sales surged on a bounce back in the Northeast, but there were so few actual sales that the margin of error is massive--too massive to give much credence to the data (try 111%!)


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
102-10 : +0-03
FNMA 3.5
105-02 : +0-03
FNMA 4.0
106-28 : +0-02
Treasuries
2 YR
0.5810 : +0.0040
10 YR
1.9090 : +0.0000
30 YR
2.4970 : -0.0120
Pricing as of 3/24/15 12:16PMEST

Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
9:58AM  :  Little-Changed After CPI; Outperforming Europe Again

Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "table 1, page 2, "northeast" column: http://mndne.ws/1ENgMGk"
Ira Selwin  :  "± 111.2"
Ira Selwin  :  "Yeh look at the +/- thou"
Jason Anker  :  "if there were 5 sales in Jan it's not"
Victor Burek  :  "that seems unbelievable"
Jeff Anderson  :  "Wow. 152% up in Northeast. We just got our county stats and YOY home pending sales down -20.8% and Closed sales down -6.9%. Somewhere was smoking hot."
Matthew Graham  :  "RTRS- US FEB HOME SALES NORTHEAST +152.9 PCT, MIDWEST -12.9 PCT, SOUTH +10.1 PCT, WEST -6.0 PCT"
Matthew Graham  :  "RTRS- US FEB SINGLE-FAMILY HOME SALES +7.8 PCT VS JAN +4.4 PCT (PREV -0.2 PCT)"
Matthew Graham  :  "RTRS- US FEB SINGLE-FAMILY HOME SALES 0.539 MLN UNIT ANN. RATE (CONS. 0.465 MLN) VS JAN 0.500 MLN UNIT RATE (PREV 0.481 MLN)"
Merrill Ross  :  "But, they have engaged in an unprecedented policy of accommodation for so long, perhaps they fear that they are missing the signs of incipient inflation hiding behind the improvement in employment figures. Monetary policy has to be anticipatory. "
John Tassios  :  "My point on prev comments was to convey, the basic mandate definition of FED increasing rates is to slow down inflation, slow down money velocity, and cool off economic overcapacity . We are not close to any of that at the current time. "
John Tassios  :  "they telegraphed it so much Aaron that they will raise in 2015. They now have to raise to keep credibility with markets, but that could provide a big headwind to economy growing once they raise."
aaron meyer  :  "JT do you think the Fed will raise rates at all this year? I don't and next year is an election year"
John Tassios  :  "the Jan wages was an anomaly, due to several states increasing min wage late last year. Wages back to flat to 0 gains again."
Matthew Graham  :  "RTRS- U.S. FEB REAL AVERAGE WEEKLY EARNINGS ALL PRIVATE WORKERS -0.1 PCT VS JAN +1.2 PCT (PREV +1.2 PCT)"
Matthew Graham  :  "RTRS- U.S. FEB CPI YEAR-OVER-YEAR UNCHANGED (CONS -0.1 PCT), EXFOOD/ENERGY +1.7 PCT (CONS +1.6 PCT)"
Matthew Graham  :  "RTRS- U.S. FEB CPI +0.2 PCT (+0.2169; CONSENSUS +0.2 PCT), EXFOOD/ENERGY +0.2 PCT (+0.1568; CONS +0.1 PCT)"