MBS RECAP: Mini Roller-Coaster on Corporate Tradeflows and Fed Speak

By: Matthew Graham

The trading day started out timidly enough, but with a bit of an ominous tone.  This had to do with the fact the German Bunds made new all-time lows yet again, while US Treasuries did almost nothing to follow.  The first two hours of the domestic session were total duds in terms of movement.  In another ominous move, trading levels were having nothing to do with any sort of rally that would take them back through yesterday's best levels.

When rates know they won't go any lower, there's only one other direction to go.  They went higher after the 10am Philly Fed data gave traders their first decidedly positive data points of the week to hide behind.  It was almost as if they were just looking for an excuse to bounce higher. 

At least that's how it would have looked if we didn't know that corporate debt tradeflows were adding to the sell-off.  Goldman and BofA brought big deals to market today, and big banks traditionally use the Treasury market to lock their borrowing rates during their issuance process.  Traders know this and thus got ahead of the game by selling before the big boys launched bidding on their deals.  They did this again coming back in the other direction in the afternoon.  That's the point at which Goldman and BofaA themselves would buy back the Treasuries used to hedge their deals.  Unsurprisingly, we're drifting out very close to unchanged levels.


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
102-17 : +0-01
FNMA 3.5
105-07 : +0-01
FNMA 4.0
106-31 : +0-03
Treasuries
2 YR
0.4840 : -0.0160
10 YR
1.8880 : -0.0020
30 YR
2.5710 : +0.0310
Pricing as of 4/16/15 4:02PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
2:46PM  :  Fed Hawks Speaking Dovishly and Corporate Deal Flows Help Reverse the Curse
10:18AM  :  ALERT ISSUED: Negative Reprice Considerations as After Data and Fischer
9:35AM  :  Europe and Data Clash With Corporate Issuance

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "Sure PG, most likely because the EU is buying EU debt. No one is buying sovereign debt to earn a return over time. So it's not a matter of investors seeing a better return here due to our higher rates. "
Peter Godden  :  "Is there any reason that we aren't seeing a better rate environment because of EU Bond market? "
Matt Hodges  :  "yes, recent change to fully amortized or 1/2%"
Mike Tavani  :  "Orig/UW Question: Anyone running into issues using a residents Income Based Repayment plan for student loans?"
Andy Pada, Jr.  :  "I think that Fischer is being diplomatic, preparing the market for an eventual rate hike. Whereas Mester, Lockhart, and Rosengren have been middle of the road to dovish. "
Chris Robson  :  "Fischer has said he wants to scale back the forward guidance form the Fed, so that they can have more flexibility. I think they feel that the guidance prevented them raising rates end of last year when the economy was looking stronger, now they can but the economics are not quite right."
Matthew Graham  :  "agreed MB, they're all over the place right now. Almost seems like it's part of the strategy."
Michael Baker  :  "Could the Fed send out just a few more speakers to help create total confusion? Maybe Allen Greenspan could sprinkle some nuttzz on this sundae and chime in later today with some renewed concerns about the wealth effect just for old time sake. "
Matthew Graham  :  "RTRS- FED'S ROSENGREN: CONDITIONS FOR U.S. RATE HIKE HAVE NOT BEEN MET"
Matthew Graham  :  "Things that make ya go hmmm"
Matthew Graham  :  "RTRS- FED'S MESTER: STRONG DOLLAR COULD HELP EUROPE, WHICH WOULD BOOST U.S. ECONOMY"
Bryce Schetselaar  :  "i like this rebound we are having"