Bond markets are in weaker territory today, more than erasing all of yesterday's gains and taking 10yr yields to the highest levels in 2 weeks. The key culprit is the surprise rate cut from the PBOC (People's Bank of China). In the chart below, notice how stocks and bonds were trading fairly flat, and how volume in Treasury futures was relatively absent before the news.
The second surge of volume and weakness arrived at 8:20am, which is not an uncommon time of day to see such surges in these circumstances. Specifically, when overnight data is the key market mover and when there's nothing significant on the domestic calendar, the traders that rely on the Treasury pit being open at the CME play a more active role in determining where rates go (and the pit opens at 8:20am).
In addition to the specific news, bond markets were already up against the somewhat gloomy technical reading outlined in the Day Ahead. While we're still in the confines of October's trading range, this move suggests extreme vigilance in the upcoming week. If 10's break October's highs in conjunction with correlated moves in other markets, it's bad news.
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 3.0 101-15 : -0-09 | FNMA 3.5 104-13 : -0-07 | FNMA 4.0 106-22 : -0-05 |
| Treasuries | 2 YR 0.6410 : +0.0360 | 10 YR 2.0900 : +0.0619 | 30 YR 2.8980 : +0.0350 |
| Pricing as of 10/23/15 1:47PMEST |
Morning Reprice Alerts and Updates
10:06AM : Bonds Smacked With Eurasian 1-2 Punch
Live Chat Featured Comments
Jason Anker : "and there is the problem. "
John Murphy : "At MBA national, pay for play was discussed most abhor but consensus was "no way" CFPB goes after realtors/builders. "
Sung Kim : "the day of reckoning is coming for all those that think this practice will be allowed to continue"
Blake Carrillo : "I have seen enough competitive quotes with my builder's competing lenders to suggest this is already happening...those are the ones who are not outright writing checks for parties and dinners every other week of course...CRAZY what people will risk to save a few hundred dollars in marketing expenses. Pennies compared to what they are risking with these practices."
Sung Kim : "Next up - preferred lenders that give lender credit for the builder incentive "
Jason Anker : "that one is expected I think"
Compliance is Watching Me : "the rumor mill says another bomb is going to drop today regarding MSA's"
Matthew Graham : "I generally find it easier and more analytically valid to make fun of the so-called death cross than to put much stock in it. That said, it would be in our favor this time, so I hope my cynicism is misplaced. "
Matthew Graham : "It certainly wasn't meaningful in June, except perhaps as a lagging indicator that the sell-off had sold-off enough"
Edgar Young : "looks like the 200 and 50 day SMA's will be crossing soon......meaningful?"
Matthew Graham : "the drop was in late August, and primarily a China issue. Since then, China came close to hitting GDP figures (take those for what they're worth, considering the source). Today's rate cut is the straw on top of draghi's straw from yesterday, on top of the US bond market camel. "
Oliver Orlicki : "Stocks had a blip drop in Sept and have been moving up since. Even w the crappy data."
Oliver Orlicki : "Seems like China is a distant memory"
Matthew Graham : "but you could say that's why stocks are higher too, so chicken/egg"
Matthew Graham : "I wouldn't limit it to stock lever. it's also defensiveness over central banks continuing to throw cash at problems, and an accounting for the very small chance that it actually works."
Victor Burek : "this is just a stock lever...Europe up 3%"
Victor Burek : "MBS out performing"
Jason York : "man, what a crappy start to a Friday"