MBS RECAP: Bonds Back to Best Levels With Help from Stocks

By: Matthew Graham •

Nothing like some good, old-fashioned 'stock lever' to restore one's faith in classic market paradigms.  That's the one where traders "sell stocks, buy bonds," or vice versa.  There was certainly plenty of stock selling today as S&P futures fell more than 40 points from Friday's close.  In fact, it was the biggest day of S&P losses since 2011.

Up until the time that the pervasive weakness took over in stocks, bond markets were selling off.  That doesn't mean they were in negative territory, just that they were heading that direction after a huge initial pop to the best levels in a week. Stocks were part of the overnight trend as well.  S&P futures fell 40 points at the open and erased more than 20 points of that weakness by the time the NYSE open rolled around.

Shortly after the NYSE open, domestic investors increasingly moved into bonds as stock selling pressure was the dominant force.  It clearly wasn't Euro-driven panic, considering the Euro ended at higher levels than Friday afternoon!  That's certainly not the sort of move we'd expect to see from a currency that was imminently fearing for its existence.

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
99-15 : +0-26
FNMA 3.5
102-29 : +0-22
FNMA 4.0
105-26 : +0-15
Treasuries
2 YR
0.6370 : -0.0790
10 YR
2.3280 : -0.1464
30 YR
3.1010 : -0.1409
Pricing as of 6/29/15 5:30PMEST
Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
11:12AM  :  Reprice Risk Wanes as Bonds Bounce Back
9:54AM  :  ALERT ISSUED: Bond Markets Begin Unwinding Overnight Gains; Early Negative Reprice Risk
MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Sung Kim  :  "seems to me that if this were going to be short lived, as in done tomorrow, we would have given back 1/2 our gains... so maybe month end trade flows is helping a little, but there is black swan risk here"
Matthew Graham  :  "Safer to say that we're simply seeing general technical support from 2.47 to 2.50 and general resistance from 2.26-2.29"
Matthew Graham  :  "a technician could view it that way. Then again, a technician would say that ALL of the improvement is always attributable to patterns in price/yield movement ONLY (and not, in any way, dependent on geopolitical and economic events). "
John Rodgers  :  "whats the velocity of an unladen swallow?"
Chad Olson  :  "Is any part of this improvement a technical bounce off of the 2.5% level on the 10yr? "
Andy Pada, Jr.  :  "but does it make it more palatable for other countries to miss their IMF payments?"
Victor Burek  :  "There’s a difference between missing a payment to bond investors, and to an official institution such as the IMF. Under the fund’s policy, countries that miss payments are deemed to be in “arrears.” The Washington-based lender plans to stick to that language, rather than using the term “default,” IMF spokesman Gerry Rice said Thursday."