MBS RECAP: Bond Correction Now at 2.5 Days; Mortgages Outperform

By: Matthew Graham •

Longer duration bonds got hit hard today.  Case in point, 30yr bonds are up nearly 13bps while 5's are only up 6bps.  The better performances in the belly of the curve (3-5yr) helped MBS outperform the 10yr benchmark noticeably today.  10's are heading out the door near levels that are quite a bit higher than yesterday's highs.  MBS, on the other hand, are right in line with yesterday's weakest levels.

The broader theme continued to set the tone as bond markets "correct" after  several days of market panic.  The correction began on Monday, but only the past 2 days have seen weaker day-over-day levels.  Today's installment included the first day in 5 sessions where the Shanghai Stock Exchange didn't close lower than the last session.  Domestic equities also continued to find their footing.  S&Ps closed near yesterday's highs, but  they certainly aren't trying to shoot the moon just yet.

Data and auctions were no help for bonds either.  Durable Goods were much stronger than expected, and the afternoon's 5yr auction was rotten.   The latter overwhelmed what little benefit we had earlier in the day from dovish Fed comments (Dudley said a September hike was now "less compelling").

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
100-20 : -0-12
FNMA 3.5
103-24 : -0-09
FNMA 4.0
106-09 : -0-05
Treasuries
2 YR
0.6760 : +0.0670
10 YR
2.1769 : +0.0989
30 YR
2.9340 : +0.1260
Pricing as of 8/26/15 4:59PMEST
Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
2:12PM  :  ALERT ISSUED: Negative Reprices Incrementally More Likely
1:43PM  :  ALERT ISSUED: Negative Reprice Considerations for Some Lenders
1:15PM  :  Trying to Bounce After Poorly-Received 5yr Treasury Auction
8:56AM  :  Durable Goods Much Stronger Than Expected; Bonds Not a Fan
MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Andrew Horowitz  :  "and if they priced at the peak of the 3.5 on Monday and the bottom today its 27 ticks"
Andrew Horowitz  :  "Justin depends on when they priced, the 3 coupon is off almost 7/8ths from peak monday morning"
Matthew Graham  :  "RTRS - U.S. 5-YEAR NOTES BID-TO-COVER RATIO 2.34, NON-COMP BIDS $36.19 MLN"
Matthew Graham  :  "expectations were for 1.458"
Matthew Graham  :  "RTRS - U.S. SELLS $35 BLN 5-YEAR NOTES AT HIGH YIELD 1.463 PCT, AWARDS 58.27 PCT OF BIDS AT HIGH"
Justin Harward  :  "Riddle me this: So pricing this morning is off by a full point versus monday. the 3.5 was at 104-8 then and 103-29 now - a difference of only 11 ticks or about 3/8 of a point. I'm wondering how other's compares?"
Matt Hodges  :  "for example, some lenders will allow you to close up to 60 days prior to starting a new position, as long as there are no contingencies"
Matt Hodges  :  "no way"
Andy Braun  :  "conventional loan, has offer letter for promotion to a new position in May 2016, any way to use the projected income now?"
Roland Wilcox  :  "MG as always thx for great day ahead - if US10YT chart proves accurate can’t imagine what MBS pricing looks like 2016-2017!"