MBS RECAP: Moderate, Logical Big Picture Weakness Ahead of NFP

Bond markets sold off today, and when you see the longer term chart below, it's hard to be too upset about it. The chart not only serves to provide some context for today's weakness, but also some potential causality.

While it's never a guarantee that technical levels will stop a bond market rally dead in it's tracks, when it happens, it can make the weakness easier to understand. In the current case, rates had been falling nicely since the beginning of March, and for that matter, since the beginning of 2014. Yesterday's bigger rally brought us right in line with an important long-term inflection point marked by the mid 1.8 range in 10yr yields.

Simultaneously, yields had also fallen to the lower end of the long-term rally trend. Here again, there's no hard and fast rule that says these lines must force rates to bounce higher, but they do amount to a "vote" of sorts--all things being equal.

And all things were not quite equal today. The economic data was slightly too strong to be ignored. Jobless Claims hasn't caused much of a stir recently, but today's was nearly the best report in 15 years. Factory Orders were strong as well, but let's pretend for a moment those reports don't actually matter as much in and of themselves. In that case they still would have served a purpose today in that they were in no way sufficient to keep the rally going through the resistance levels.

The one disconcerting thing about the chart above is that it means bonds are heading into tomorrow's NFP with much to lose in the event of a big beat, and an uncertain capacity for improvement in the event of a miss.

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.

Today's Reprice Alerts and Updates

A recap of Alerts and Updates provided to MBS Live subscribers.

MBS Live Chat Highlights

A recap of featured comments from the Live Discussion on the MBS Live Dashboard.

Matthew Graham  :  "This conversation and these considerations are nonetheless occurring inside the boundaries of a long term positive trend, so it's all relative"

Jason Anker  :  "a reminder of why I pay HIM"

Matthew Graham  :  "AP, I think there is reason to be a bit more defensive as well. Double bounce late March and y'day on long term inflection point, combined with a generally strong move early March and a run of downbeat data suggests there's more to be lost on a strong report than there is to be gained from a weak report"

Matt Hodges  :  "Andy - the Day Ahead discussed markets being closed affecting today"

Hugh W. Page  :  "I think we need to see a much weaker than expected report along with stagnant to declining wage growth to get a positive result tomorrow. Anything that resembles the past 2 NFP reports = ugly day most likely."

Bryce Schetselaar  :  "We have been burned the last couple months"

Andy Pada, Jr.  :  "other than it being the day before NFP, is there any technical or substantive reason to be "extra" defensive?"

Hugh W. Page  :  "Personally I'd be locking em up today. As noted in the Day Ahead this morning we're at a critical level and it could get ugly if things don't go our way."

Jason Anker  :  "realtors still push to keep it local too"

Matt Hodges  :  "it may be Gen X, Y or Z - i can't keep them straight, but most of my borrowers want the high touch, high service, high skill. I might be old school after 16 years, but i don't agree that local won't matter."

David de Courcy  :  "I agree Dustin. When I send GFE's to clients, I include a video breakdown. Questions come back in the form of an email. Although verbal/written skills are important in that context as well"

John Tassios  :  "you are correct Dustin, in the old days Realtor centric for us to get biz referrals. In the near future , it will be internet and other technological devices and evolve to direct borrower centric for referrals. "

Dustin McAlister  :  "as the internet evolves and more younger people buy homes and the baby boomers stop being local won't be as big of a deal in the future... the way everyone is becoming more like a facebook/text/instagram type of communicator verbal transactions are less and less, much less face to face"