MBS MID-DAY: Series of Unfortunate Events for Bond Markets

By: Matthew Graham

In terms of the event calendar, today was supposed to be quiet.  One of the wild cards laid out in this morning's commentary was an unexpected headline from Europe.  We ended up getting something to that effect early this morning with news that Greece's creditors were working on a debt deal. 

If you find it hard to care about those sorts of headlines after getting a different version of them hundreds of times in the past 5 years, you're not alone.  But core European bond markets cared enough to sell-off a bit more than they already were, thus pulling Treasuries along for the ride.

The overnight weakness had domestic traders lined up to jump back on the familiar wave of selling toward the other side of the range.  After all, we knew that last week's gains didn't constitute a compelling break of the range on the positive side.  Even as mainstream articles were saying there were signs the worst was over in the Treasury sell-off, we were discussing the prospects for increased corporate issuance this week and a move right back into the range (here)

Weaker than expected Factory Orders were no help this morning, and that's no surprise.  Traders are working the range regardless of data.  That won't change until tomorrow morning with the ECB and ADP doubleheader.  Between now and then, we can only really hope to close at or below 2.28 in 10yr yields.  The comparable level in MBS is at or above 103-22 in Fannie 3.5s.


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
100-12 : -0-18
FNMA 3.5
103-24 : -0-13
FNMA 4.0
106-10 : -0-08
Treasuries
2 YR
0.6610 : +0.0120
10 YR
2.2710 : +0.0880
30 YR
3.0270 : +0.0920
Pricing as of 6/2/15 1:49PMEST

Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
11:54AM  :  ALERT ISSUED: If You Haven't Seen a Reprice Yet, You Probably Will
10:40AM  :  ALERT ISSUED: Some Lenders May Already be Considering a Reprice
9:51AM  :  Bond Markets Should Feel "Gilty" About Overnight Weakness

Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "oh, I think there's plenty of fear that the ECB could be "less aggressive" in some way. Draghi reiterated QE commitment last time he spoke, but people are still worried he gives some indication that it won't last until Sep 2016. "
Michael Gillani  :  "MG, you don't see any of this being attributed to an anticipated beat in jobs numbers or ECB news do you?"
Matthew Graham  :  "Top 10 signs there's nothing on the event calendar and headline writers had to pick something."
Matthew Graham  :  "I saw a CNBC headline earlier that said something like "markets wait for Brainard" and I chuckled. "
Matthew Graham  :  "Nope, wouldn't expect it. Who is Lael Brainard anyway? "
Michael Gillani  :  "No impact on markets"
Matthew Graham  :  "There are a bunch of other wires here all in the same vein. Weak global economy weighing on pace of recovery... Tight financial conditions delaying return to normal rates... Risk of further deterioration regarding Greece... Wants more evidence of inflation..."
Matthew Graham  :  "RTRS - FED'S BRAINARD SAYS U.S. ECONOMIC SLOWDOWN MAY BE MORE SIGNIFICANT THAN EXPECTED, SAYS PERIOD OF "WATCHFUL WAITING" APPROPRIATE BEFORE RAISING RATES"
Matthew Graham  :  "RTRS- U.S. APRIL FACTORY ORDERS -0.4 PCT (CONSENSUS UNCHANGED) VS MARCH +2.2 PCT (PREV +2.1 PCT)"
Ira Selwin  :  "Greece in the news as always - "
Sung Kim  :  "MG - u think corp bond issuers also try to time the market?"
Ira Selwin  :  "Rough start leading into tomorrow"