MBS MID-DAY: Week-Long Positive Trend Running Out of Steam

By: Matthew Graham

After the last visit to May's weakest levels (last Wednesday morning), MBS and Treasuries have been in a fairly linear trend back toward stronger levels.  But as we approach those levels, bond markets are visibly having second thoughts.  It's all right here in this easy-to-read chart:

I would hesitate to read too much more into the current state of affairs.  There are logical reasons for a positive correction within the range.  Those reasons have existed for a few weeks now and the light at the end of the tunnel in terms of May's debt supply (Treasuries and Coroporate debt) helped them translate into the move we've seen over the past week.

It continues to be the case that Europe's participation is required when it comes to mounting any major offensive back toward lower rates.  German Bunds have been in the same sort of linear downtrend, and have encountered the same sort of range resistance.  The takeaway is that we're still technically "in the woods," although we're right edge where the light begins to shine through.  It likely won't be until next week that we either confirm our dash to safety, or get dragged back into the woods by some evil creature we can't see lurking in the shadows.

All of the above is a slightly bigger picture view.  Shorter term, we had weaker Jobless Claims this morning, which didn't help much and stronger Pending Home Sales data, which didn't hurt.  Two paradoxical trading reactions reinforce the reality: trading is frequently disconnected from economic fundamentals right now.  Supply considerations and month-end trading are compounded by light liquidity to create the movement we see.  All told, it's a light day.  Markets are more interested in next week.


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
101-05 : +0-01
FNMA 3.5
104-11 : +0-00
FNMA 4.0
106-22 : +0-01
Treasuries
2 YR
0.6330 : -0.0160
10 YR
2.1370 : +0.0070
30 YR
2.8830 : +0.0150
Pricing as of 5/28/15 12:11PMEST

Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
10:00AM  :  Supply-Related Selling Pushes Back on 3rd Consecutive Rally Attempt

Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "Concur with VB. seeing .1 - .2 range"
Victor Burek  :  "plaza is only .125 better and they didn't reprice yesterday"
Frank Hanna  :  "what is the day over day pricing change that most are seeing?"
Matthew Graham  :  "RTRS- U.S. 30-YR FIXED RATE MORTGAGES 3.87 MAY 28 WEEK VS 3.84 PCT PRIOR WEEK-FREDDIE MAC"
Matthew Graham  :  "RTRS- U.S. APRIL PENDING HOME SALES RISE 14.0 PCT FROM APRIL 2014 - NAR"
Matthew Graham  :  "RTRS- U.S. APRIL PENDING HOME SALES INDEX +3.4 PCT (CONSENSUS +0.9 PCT) TO 112.4 - NAR"
Matthew Graham  :  "RTRS- US CONTINUED CLAIMS ROSE TO 2.222 MLN (CONS. 2.208 MLN) MAY 16 WEEK FROM 2.211 MLN PRIOR WEEK (PREV 2.211 MLN)"
Matthew Graham  :  "RTRS- US JOBLESS CLAIMS ROSE TO 282,000 MAY 23 WEEK (CONSENSUS 270,000) FROM 275,000 PRIOR WEEK (PREVIOUS 274,000)"
Scott Valins  :  "these overnight holds in treasuries the past few days have given me some optimism"