MBS RECAP: Bonds Follow Bunds, Then Nothing at All

By: Matthew Graham •

Bond markets were in bad shape right from the outset today.  By the end of it, 10yr yields had fully traversed THE range laid out in this morning's commentary (2.13-2.28).  So that means we've essentially traversed the entire range in 2 days.  But hey, that's a great improvement from May 11th when it only took one day!

So what's up with this weakness?  Really, nothing much has changed during this time.  Corporate bond issuance hurt us in May and it merely subsided into the end of the month as it tends to do.  Same story with European drama and Fed rate hike expectations.  Now, June has simply picked right back up where most of May left off.  The range continues to be the range.  And markets continue to wait on a few big unknowns before deciding which direction to break out.

Today's biggest motivation was European trading.  British and German sovereign debt pushed the pace of weakness early.  The following chart shows German Bunds in red and US 10yr yields in yellow.  You don't need to know anything about anything to see the red and yellow lines moved up together and when the red line stopped, the yellow line went flat.

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 : -0-14
FNMA 4.0
106-09 : -0-08
Treasuries
2 YR
0.6570 : +0.0080
10 YR
2.2660 : +0.0830
30 YR
3.0160 : +0.0810
Pricing as of 6/2/15 5:19PMEST
Today's 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
MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Christopher Stevens  :  "really weak numbers and downward revisions. It seems the market thinks Fed will raise in Sept or Dec and will not be caught on th ewrong end of that trade."
Victor Burek  :  "I think weak numbers would"
Sung Kim  :  "bund trumping all"
Sung Kim  :  "and even that may not help"
Hugh W. Page  :  "Which we may get"
Victor Burek  :  "gonna need weak jobs numbers"
Hugh W. Page  :  "May 19th we were right here and proceeded to rally down to 2.12. Let's hope history repeats itself :)"
Ray Leone  :  "I believe today's market is a great example of what the bond markets fear the most...uncertainty. Sure I talk about churning (just for fun), but given no one knows what the future holds (lack of liquidity and all that gibberish) until someone figures out how this all ends (reinvent monetary policy) it is anyone's guess, and the market will continue to be volatile and those that can will continue to churn, as someone has to make money. Enough said, back to making a living, if you can call it that :-)"