MBS MID-DAY: Big Move in Europe Helps Bonds Hold Gains

By: Matthew Graham

Treasury yields and equities began the overnight session moving higher after stronger manufacturing data in China.  Treasuries managed to hold their ground while stocks continued higher.  The onset of the European trading session helped bonds even more.  There has been an impressively sharp rally in European bond markets and a nearly as impressive selling spree in European equities markets. 

Economic data didn't provide much by way of inspiration for bonds.  That's especially true of the 830am Jobless Claims data, which was completely passed-over.  The 10am ISM Manufacturing data was a slightly different story, but not because the results suggested something new about the nature of the economy.  Instead, this looks like market participants were making sure they were in position to capitalize on a weak report (i.e. bond rally) and then simply sold bonds when the data wasn't too much weaker than expected.

Were it not for the European influences, US Treasuries and MBS might not be faring as well as they are, post-ISM.  Even then, we're just barely into positive territory.  With European markets closing, this raises the risk of an afternoon bounce for bonds.   It looks like we're trying to fight that off presently.  2.04% is the line in the sand for 10yr yields (i.e. if yields cross above that, it would confirm a negative bounce).


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
101-18 : +0-04
FNMA 3.5
104-15 : +0-03
FNMA 4.0
106-24 : +0-01
Treasuries
2 YR
0.6410 : +0.0120
10 YR
2.0310 : -0.0040
30 YR
2.8450 : -0.0090
Pricing as of 10/1/15 1:12PMEST

Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
10:17AM  :  10am Data Punctuates Europe-Driven Rally. Something Else Happening Now?

Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Sung Kim  :  "here is the spreadsheet for effective dates for the 15-july announcements http://www.freddiemac.com/singlefamily/guide/docs/bll1512_spreadsheet.xls"
Sung Kim  :  "here is the link for when they announced the change and what secion to refernce http://www.freddiemac.com/singlefamily/guide/bulletins/pdf/bll1512.pdf"
Sung Kim  :  "in other words, u can have up to 6 regardless of transaction"
Sung Kim  :  "LP does not distinguish between refinance type for NOO financed"
Sung Kim  :  "also - this is a very very useful link for LP changes http://www.freddiemac.com/singlefamily/guide/docs/bll1516_spreadsheet.xls. "
Sung Kim  :  "someone was asking about continuity of obligation yesterday when borrower has not been on title - LP allows for 6 months, i think 12 months was being thrown around"
Matthew Graham  :  "We even wrote it up once Why is the Beginning of the Month a Supportive Time for MBS? "
Matthew Graham  :  "pretty common at the beginning of the month. This move is a bit more pronounced because MBS were at their weakest relative level of performance in more than a month yesterday, and because Treasuries took a more specific hit from a big corporate deal that came out after hours (HP, more than 10bln$)"
Spencer Packer  :  "Not used to seeing MBS outperform like this..."
Scott Valins  :  "no more than 4"
Scott Valins  :  "no BB"
Brent Borcherding  :  "Thanks, Eric, but will they allow for cash out on #5 or #6?"
Eric Weishaar  :  "BB this came up the other day, yes Freddie will allow up to 6 financed properties"
Brent Borcherding  :  "Will Freddie allow for cash out on an investment proeprty with 5 financed properties?"
Scott Valins  :  "with a good LOE explaining why they won't be taking another lease "
Sung Kim  :  "u/w discretion"
jeff weaver  :  "if a lease has less than 10 months left and they have a car owned free and clear, can the payment be excluded with a fannie 30yr conv"
Matthew Graham  :  "RTRS - ISM U.S. MANUFACTURING NEW ORDERS INDEX LOWEST SINCE NOVEMBER 2012"
Matthew Graham  :  "RTRS- ISM U.S. MANUFACTURING ACTIVITY INDEX LOWEST SINCE MAY 2013"
Matthew Graham  :  "RTRS- ISM U.S. MANUFACTURING EMPLOYMENT INDEX 50.5 IN SEPT (CONSENSUS 50.7) VS 51.2 IN AUG"
Matthew Graham  :  "RTRS- ISM U.S. MANUFACTURING PRICES PAID INDEX 38.0 IN SEPT (CONSENSUS 39.3) VS 39.0 IN AUG"
Matthew Graham  :  "RTRS - ISM U.S. MANUFACTURING ACTIVITY INDEX 50.2 IN SEPT (CONSENSUS 50.6) VS 51.1 IN AUG"
Matthew Graham  :  "RTRS- US JOBLESS CLAIMS ROSE TO 277,000 SEPT 26 WEEK (CONSENSUS 270,000) FROM 267,000 PRIOR WEEK (PREVIOUS 267,000)"
John Tassios  :  "Bond Market is always the most consistent indicator of future economic growth and investing risks in marketplace. They have been signaling for a while that all is not well. "
Christopher Stevens  :  "I would be surprised to see sub 2 today but I can't seem to get a read on this market lately. Stocks moving up and buyers in bonds still confused me a little yesterday and this morning. Regardless of the 'stock lever' I was thinking that based on the recent rate yield improvement of 15bps since last Friday that we would see a little pull back going in to NFP. "
Oliver Orlicki  :  "Sub 2 today?"
Matt Hodges  :  "it's relatively quiet right now and it's the first day of October, kicking off Cancer Awareness Month. My stepmother's sister, my Mom, my Sister and my Wife are all BC survivors. If you are a woman, think about your *** health. If you have a woman in your life encourage her to do monthly exams, schedule Mammograms or MRIs as appropriate. Thanks for allowing the PSA, MG."