MBS MID-DAY: Bonds Basking in Month-End Glow

By: Matthew Graham

The overnight session began with bond markets moving into weaker territory against the backdrop of a recovery in equities.  There was clearly a lot of month-end buying yesterday, so it was fair to wonder if the sponsorship would wane today.  In other words, certain investors are forced to buy a certain amount of bonds heading into the end of the month.  They can do this any time before the end of the month, but usually have to make adjustments in the last few days in any event.  Yesterday's trading patterns suggested that month-end buying was prevalent, so there was some cause for concern that today wouldn't be as resilient by comparison.

If you happened to have been up all night watching Treasury yields rise, that concern was all the more logical.  Fortunately, month-end buyers were lined up at the domestic open.  European bond markets were already bouncing in a positive direction by then--a fact that didn't hurt our own ability to recover.  10yr yields moved from highs of 2.104 to 2.06 currently, helping them break even on the day.  MBS are in just slightly positive territory to boot.  Given that yesterday was the best close in more than a month, holding ground here amid rising stock prices is a victory.

Keep an eye out for volatility in about an hour when Yellen speaks and again about an hour after that at the official bond market close (3pm).  This time of day is much more active on month/quarter-end days.


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
101-11 : +0-02
FNMA 3.5
104-10 : +0-01
FNMA 4.0
106-21 : +0-01
Treasuries
2 YR
0.6370 : -0.0160
10 YR
2.0600 : +0.0000
30 YR
2.8740 : +0.0160
Pricing as of 9/30/15 1:13PMEST

Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
10:51AM  :  Nearly Unchanged Despite Big Stock Rally

Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "RTRS- CHICAGO PURCHASING MANAGEMENT PMI LOWEST SINCE MAY, FIRST CONTRACTION SINCE JUNE"
Matthew Graham  :  "RTRS - CHICAGO PURCHASING MANAGEMENT INDEX 48.7 IN SEPTEMBER (CONSENSUS 53.0) VS 54.4 IN AUGUST"
Matthew Graham  :  "must be a WEAK Chicago PMI coming up"
Matthew Graham  :  "a few big trades coming through Treasury futures"
Sung Kim  :  "now here is a cunundrum for us - reverse stock lever?"
Matthew Graham  :  "RTRS - U.S. NON-FARM PAYROLLS LIKELY GREW 190,000 IN SEPT, "SIZABLE" UPWARD REVISION SEEN ON AUGUST FIGURE - MOODY'S ANALYTICS' ZANDI"
John Tassios  :  "should get more month end buying today. But, Tomorrow may have a bond selloff positioning ahead of NFP friday."
Sung Kim  :  "dollar stronger, stocks up - another crazy day. cant wait for the rally at 2pm"
Matthew Graham  :  "RTRS - REUTERS CONSENSUS FORECAST FOR ADP PAYROLL CHANGE FOR SEPT WAS FOR INCREASE OF 194,000 JOBS"
Matthew Graham  :  "RTRS - ADP NATIONAL EMPLOYMENT REPORT SHOWS U.S. EMPLOYMENT INCREASED BY 200,000 PRIVATE SECTOR JOBS IN SEPTEMBER"