MBS RECAP: Boring, Slow Morning Turns into Boring, Slow Afternoon

By: Matthew Graham

Thanks for reading, this has been my attempt to write a headline that made absolutely no one want to click and read the story.  But facts are facts, and today was just plain boring for bond markets.  10yr yields spent almost the entire day trading between 2.37 and 2.39.  To hold a 2bp trading range amid the recent volatility is truly something special.  It's special in the same way as the discovery, and subsequent ingestion of Benadryl, Ambien, or whatever else makes you sleepy.  But I digress...

There was no substantive news today, although there were untold scores of meaningless headlines concerning the Greek debt deal.  None of these matter, nor do they need to be considered.  None of these can be assumed to represent the truth either.  While it's entirely possible that many of them could be true, there's too much of a track record of Greek debt negotiations being a liar's game to believe any words before actions.  And trading reflects that, as the abundance of words and absence of actions left markets very little changed.

US bond markets outperformed Europe, although 10yr yields were careful not to break Friday's post-NFP lows of 2.366 (also last Wednesday closing levels and early May's outright intraday high).  The conclusion is that this could be shaping up as a technical inflection point.  It would be reassuring if we could get below it sooner than later, to whatever extent technical levels can even provide reassurance in this environment.


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
99-18 : +0-11
FNMA 3.5
103-05 : +0-10
FNMA 4.0
105-31 : +0-08
Treasuries
2 YR
0.6850 : -0.0320
10 YR
2.3820 : -0.0274
30 YR
3.1150 : +-0.0003
Pricing as of 6/8/15 4:53PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
1:03PM  :  ALERT ISSUED: Heads-Up on Shift in Momentum
9:39AM  :  Slow Morning; Bonds Drifting Inside Post-NFP Range

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  ""The roll," as we call it, refers to the monthly settlement process in MBS coupons. The current month's coupons are retired and the trailing month (which is usually .25-.375 lower in price) takes over as the new "front month" coupon, making it seem like prices have dropped overnight. Prices didn't drop. We are simply shifting our point of view from the front month to the trailing month. The trailing month was always trading at those lower prices and lenders always knew it. The dates in the table (linked at the bottom of the econ calendar) refer to the days where pricing will have already dropped to the trailing month levels. So if you open up MBS Live on the morning where a roll date is indicated and we are inexplicably 10/32nds lower while Treasuries are unchanged, that would be the roll, and there would be no negative implication for rate sheets vs the previous day."
Charlie stinchfield  :  "I'm sure I can google it, but if anyone can explain in a sentnence or two what the roll/built in price drop means that would be greatly appreciated"
Matthew Graham  :  "just keep in mind that improving 23 ticks won't automatically equate to the price you're hoping for. Additionally, there will a built in drop in prices on Wednesday morning that will make it look like we dropped 8-12/32nds (.25 - .375) that we didn't really lose."
Ted Rood  :  "so you need about 70 bps, or 23/32"
William Hansen  :  "CS what time did your rate come out and then compare it to the MBS graph, that is what I would use as my starting point for a price change. Usually 6/32-8/32 change cause a price change depending on the lender. "
Charlie stinchfield  :  "4.25 is 100.016 and 4.125 is 99.304"
Sung Kim  :  "what is the difference in price between the two rates"
Charlie stinchfield  :  "Hi, I'm pretty new to this loan officer thing as well, I was just wondering how much of an increase in general we need to see in the fnma 3.5 to see a reprice? Right now I'm at 4.25% par and I need 4.125% at par, how much of an increase in the bonds am I cheering for?"
Jason Anker  :  "consolidation didn't work out well for us last time. "
Matt Hodges  :  "i don't like "green and ominous""
Matthew Graham  :  "
A new 'MBS Mid-Day' has been issued:
Global Bond Markets Consolidating After ECB/NFP Sell-Off"