MBS RECAP: Bond Markets Brace for Impact; US Worse Than Europe

By: Matthew Graham •

Paradoxically, US bond markets sold off (read: rates went higher) much more sharply than European bond markets today.  That will certainly make no sense to everyone who is blaming every move on Greece-related headlines.  If it was all about Greece, we'd see German yields taking the biggest hit when the Greek outlook improves because German debt has been the biggest safe-haven hedge against Greece-related risk. 

It's all so much to keep track of!  Suffice it to say that the big picture continues to be more of a factor than the near-term brushstrokes.  Greece is a near-term brush stroke no matter how much media attention it gets or how much it looks like Greek headlines are driving markets.  When we look back at today's trading, we see a fairly linear effort to move toward higher yields, without any of the spikes and bounces back that would characterize headline surprises.

What does that all mean?  Simply that bonds are bracing for impact from next week's potentially significant events and holiday weekend.  We have likely European headlines waiting for us on Monday and then straight to 4 days of significant data, culminating in NFP on Thursday before the extended Independence Day weekend.

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
98-21 : -0-14
FNMA 3.5
102-08 : -0-13
FNMA 4.0
105-11 : -0-11
Treasuries
2 YR
0.7160 : +0.0280
10 YR
2.4740 : +0.0620
30 YR
3.2420 : +0.0650
Pricing as of 6/26/15 5:12PMEST
Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
1:19PM  :  ALERT ISSUED: If you haven't seen a reprice yet, you probably will
12:21PM  :  ALERT ISSUED: Reprices for the Worse Likely
9:19AM  :  ALERT ISSUED: Negative Reprice Risk Already a Consideration for Some Lenders
MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matt Hodges  :  "4.125 i believe"
Bryce Schetselaar  :  "where is everyone at today, best ex on a vanilla conventional with no llpa's?"
Matthew Graham  :  "bond markets are a mess in terms of solidarity and mutual understanding of what's important and how important it is. Much of the Greece-related trading is simply other trading that's using Greece as cover. Some of it is real. Some traders who wouldn't otherwise trade Greece news end up being forced to because they perceive that other traders are, even though they can only speculate that Greece is an organic motivation for the other traders. The bottom line is in this morning's 'day ahead' chart. It's easy to see Greek movement vs US and Germany. Definitely very little big-picture connection, US and Germany are obviously interested in selling-off regardless of Greece. I think the US was interested as long ago as mid-2012, but got dragged back down by Europe. Now that Europe looks like it might be ready for it's big bounce, all hell is breaking loose (relatively). "
jeff weaver  :  "MG you've probably discussed ad nauseum but whats the 411 on bond market reaction to a deal and to a default over the weekend"