MBS MID-DAY: Bond Markets Reeling, but Not Just Because of Greece

By: Matthew Graham

As expected, this week is already seeing a surge in deal-making headlines surrounding Greece.  Depending on which headline you like, you mike be convinced that a deal is mostly done pending the working out of details, or you might be a bit more skeptical, waiting on Thursday's additional Eurogroup meeting.  Either way, there was measurable progress today, and some of that is taking a toll on bond market trading levels. 

The question is: how much of today's weakness is attributable to Greece?  Consider the fact that any interesting Greece-related news was out well before yields hit their morning lows (10yr at 2.29).  That means 10yr yields moved up to 2.35 (not a small amount of selling) for no reason.  Of course there's always a reason.  The point is that there have been and continue to be reasons other than Greece.  In fact, yields at home and abroad have been at risk of the sort of "inflection bounce" in the following chart since German yields first began hitting the floor around .75 in mid June. 

If German and US yields can't break these floors, they really don't need more than a love tap from news or data in order to start moving higher.  Existing Home Sales filled that role today, coming in at 6yr highs and beating expectations (5.35 million vs 5.25) forecast.  This resulted in additional weakness after 10am.  The selling pressure was brief, but we haven't seen any push back since hitting the weakest levels.  In addition, the timing meant that several lenders repriced negatively.


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
99-21 : -0-14
FNMA 3.5
103-03 : -0-12
FNMA 4.0
105-31 : -0-08
Treasuries
2 YR
0.6530 : +0.0320
10 YR
2.3450 : +0.0838
30 YR
3.1330 : +0.0843
Pricing as of 6/22/15 12:23PMEST

Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
10:16AM  :  ALERT ISSUED: Negative Reprice Risk Incrementally Increasing
10:03AM  :  ALERT ISSUED: Some Negative Reprice Risk for Early Lenders
9:01AM  :  Bond Markets Correcting Overdone Overnight Sell-Off

Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matt Hodges  :  "more, given lenders never passed along all the gains"
Kareem Baldwin  :  "So we basically lost all of Friday gains?"
Matthew Graham  :  "Highest Existing Home Sales reading since homebuyer tax credit expiration. "
Matthew Graham  :  "RTRS- U.S. MAY NATIONAL MEDIAN HOME PRICE FOR EXISTING HOMES $228,700, +7.9 PCT FROM MAY 2014"
Matthew Graham  :  "RTRS- U.S. MAY EXISTING HOME SALES +5.1 PCT VS APRIL -2.3 PCT (PREV -3.3 PCT)-NAR"
Hugh W. Page  :  "What I mean is it kicks the problem down the road. Problem has not been fixed. Greece is still insolvent, the debt unpayable, and greek citizens will continue to suffer. But the EU is intact!!"
Hugh W. Page  :  "A can kicking is coming accept that"
Andrew Horowitz  :  "deal is coming people, please accept that"
Victor Burek  :  "all the prior proposals could have as well, but didn't...but markets like it"
Matthew Graham  :  "Most recent leg of selling begins here: RTRS- DIJSSELBLOEM SAYS GREEK PROPOSALS COULD BE BASIS OF AGREEMENT LATER THIS WEEK"
Barry Moore  :  "Looks like we may lose all of Fridays gains"