MBS RECAP: Bonds Take Rain Check on Greece Reaction

By: Matthew Graham

It's not immediately apparent when looking at 10yr yields being roughly 5.5bps higher this afternoon, but bond markets largely deferred their reaction to the situation in Greece until we get more information.  Specifically, we need to see whether or not the agreement reached this weekend will be ratified by the Greek and German parliaments.  The deadline for that is Wednesday, so we won't be waiting too long.

The uncertainty over what exactly had been agreed to this weekend was reflected in the day's bond market trading.  Early in the day when it looked like a deal had been struck, bond markets were understandably weaker.  After all, Treasuries and German Bunds benefit from Greek drama.  As the day progressed and the equivocal implications of the weekend's EU meeting became evident, bonds moved back in the other direction.

The bounce back was pronounced in Europe, with German Bunds actually returning to positive territory on the day.  US Treasuries came close, but never quite made it.  Treasuries, specifically, were held back by the big corporate bond issuance from CVS.  Corporate issuance hurts on 2 fronts; both by creating more supply in bond markets and also because the firms handling the books on the big bond offering can sell Treasuries in order to 'lock the rate.' 

MBS did a much better job of holding on to the day's gains, but couldn't help drifting slightly weaker  in the afternoon.  Ultimately, Treasuries made it almost all the way back to the day's weakest levels, but MBS held on to more than half their gains.

Bottom line, today's weakness is NOT Greece-related.  If a real Greek deal rocks bond markets, the sell-off would be much bigger.


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
98-26 : -0-06
FNMA 3.5
102-10 : -0-05
FNMA 4.0
105-12 : -0-03
Treasuries
2 YR
0.6810 : +0.0360
10 YR
2.4560 : +0.0551
30 YR
3.2370 : +0.0454
Pricing as of 7/13/15 5:02PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
10:03AM  :  Running Out of Briefcases to Open, Greece Considers Taking the Deal

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Sung Kim  :  "that strategy worked well for argentina - since then, they have been overtaken by Brazil as the largest econ, have no access to piblic debt markets, fight serious stagflation and corruption, etc. etc."
Matthew Graham  :  "I believe that's on the list of options"
jhallstead1  :  "Matt, wouldn't it be better for them to just default, and exit the Euro. The austerity measures are so punitive and the whole that they dug is so deep. Argentina has done it a couple times as has Mexico. Peg their currency at 10/1 against the Euro and call it a day."
Eric Schmoll  :  "gym membership,online gaming account, renters insurance"
Jason Lowe  :  "ah....cell phone, bill, power bill, auto insurance, are the most likely you can probably get."
Josh Olson  :  "can't - he's been living with his brother and paying cash."
Jason Lowe  :  "you can use rent with cancelled checks."
Josh Olson  :  "what can be used as "alt credit" with USDA financing (can't use rent as it is from private source). I need 2 tradelines as my client only has 2 tradelines on credit."
Matthew Graham  :  "RTRS- EUROGROUP'S DIJSSELBLOEM: BRIDGE FINANCING FOR GREECE COULD BE AGREED BY EURO ZONE BY WEDNESDAY MORNING"
Matthew Graham  :  "RTRS- LEFTIST GROUP OF LAWMAKERS IN GREECE'S RULING SYRIZA PARTY CONSIDERING VOTING AGAINST BAILOUT DEAL - SOURCE FROM LEFTIST PLATFORM"
Matthew Graham  :  "RTRS- EUROGROUP'S DIJSSELBLOEM: MINISTERS HAVE ASKED EXPERTS TO LOOK INTO BRIDGE FINANCING FOR GREECE, "IT IS VERY COMPLEX""
Matthew Graham  :  "RTRS- EUROGROUP'S DIJSSELBLOEM: EUROGROUP CONFERENCE CALL POSSIBLE ON WEDNESDAY OR THURSDAY AFTER GREEK PARLIAMENT VOTE ON REFORM PACKAGE, EXPECTS TALKS ON 3RD BAILOUT WITH GREECE TO TAKE FOUR RATHER THAN TWO WEEKS, "