MBS RECAP: Uneventful Day After After Weaker Start

By: Matthew Graham

In yet another installment of "the headline is the recap," today's trading session was largely uneventful apart from the moderate weakness carried over from the overnight session.  (See what I did there?  Same thesis as the headline, but with different words!)  If that didn't scare you away from reading the rest of this, I'll try to find something useful to say.

If nothing else, today gave us another chance to see just how closely stock prices and bond yields are following each other.  The very best look at this phenomenon began this week as the correlation was jostled somewhat significantly by last week's NFP and more so by the Fed Announcement 2 weeks before that.  The S&P is right on the doorstep of the 50 day moving average--something that people who are into stocks allegedly care about.  Perhaps bond markets care too.  OR perhaps the "asset allocation" (by stocks, sell bonds, and vice versa) trade is a relatively more active part of the market during tax months. 

The closeness of the stock/bond connection is one of the only ways to justify the complete absence of a reaction to today's 10yr auction.  The auction was pretty good, with overseas participation notably stronger.  But the minutes following the auction saw some of the narrowest trading of the day. 

By the close, MBS were only 5 ticks weaker, and had managed to hold above yesterday's weakest levels throughout today's session.  Treasuries were a bit weaker by comparison, but that's understandable with the auction cycle and a moderately large day of corporate debt issuance adding Treasury-specific pressure.


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 : -0-05
FNMA 3.5
104-15 : -0-04
FNMA 4.0
106-24 : -0-02
Treasuries
2 YR
0.6290 : +0.0200
10 YR
2.0650 : +0.0300
30 YR
2.8930 : +0.0210
Pricing as of 10/7/15 5:35PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
10:10AM  :  ALERT ISSUED: Bonds Crossing Technical Boundary With Stocks

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Sung Kim  :  "what happens when the clock changes back? you go back to CDT?"
Jason Zimmer  :  "same issue in central. now we use CDT and after the clock change it will be cst"
Christopher Stevens  :  "TRID LE question: for those on the East Coast are you using EDT or EST on your LE?"
Matthew Graham  :  "RTRS- U.S. 9-YR 10-MO NOTES BID-TO-COVER RATIO 2.59, NON-COMP BIDS $7.57 MLN"
Matthew Graham  :  "RTRS- U.S. SELLS $21 BLN 9-YR 10-MO NOTES AT HIGH YIELD 2.066 PCT, AWARDS 25.03 PCT OF BIDS AT HIGH"
Matthew Graham  :  "10yr auction preview: 7 out of the last 8 10yr auctions have "stopped through" the expected yield, measured by the 1pm trading level in "when-issued" 10yr yields. These are currently trading at 2.07, but may change slightly by 1pm. The recent average bid-to-cover is 2.70 for "reopening" auctions (as opposed to "refunding" auctions), and that's been consistent over the last 3 reopenings. Indirect bids have ranged from 57 to 60.1 percent. For more background on this jargon, if you need it: http://www.mortgagenewsdaily.com/mortgage_rates/blog/242898.aspx"
Kevin Danforth  :  "that is both FNMA and FHLMC as well"
Kevin Danforth  :  "correct JO, one of the buyers has to be considered a FTHB for 3% I believe"
Josh Olson  :  "With Fannie and putting 3% down you don’t have to be a first time homebuyer, correct? Clients are selling their current home and buying a new home and want to put 3% down and go Conventional."