MBS MID-DAY: Bond Markets Holding Ground in Weaker Territory

By: Matthew Graham •

Last Friday, bond markets made a small push back against the substantial selling spree on Wednesday and Thursday.  Unfortunately, it always stood some risk as being a temporary head-fake due to the influence of 'month-end' buying.  Now that the new month has begun, we're definitely missing that support as Treasuries are pushing into their weakest levels since September.  MBS are faring better by comparison with Fannie 3.0s still well inside Friday's range.

Bonds began the overnight session in decent shape, but were soon losing ground as European trading progressed.  Part of this could be chalked up to the decent data out of Europe, but the dominant story is that of the change in tradeflows for the new month. 

A tangential component of those tradeflows is the corporate bond issuance calendar.  The street has been blasted with no fewer than 12 new high grade corporate bond offerings.  Some of them are smaller dollar amounts, but they add up to an unexpectedly large addition to the "supply" side of today's bond market equation.  Higher supply=lower prices=higher rates.  This is part of the reason for MBS' outperformance (i.e. corporate issuance does more direct damage to Treasuries).

10yr yields are currently up 3bps on the day and Fannie 3.0s are down an eighth of a point.

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
100-32 : -0-04
FNMA 3.5
104-02 : -0-02
FNMA 4.0
106-15 : -0-01
Treasuries
2 YR
0.7490 : +0.0210
10 YR
2.1760 : +0.0303
30 YR
2.9500 : +0.0254
Pricing as of 11/2/15 12:53PMEST
Morning Reprice Alerts and Updates
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9:02AM  :  Bond Markets Holding Ground After Europe-Inspired Weakness
Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "RTRS - ISM U.S. MANUFACTURING EMPLOYMENT INDEX 47.6 IN OCT (CONSENSUS 50.1) VS 50.5 IN SEPT"
Matthew Graham  :  "RTRS - ISM U.S. MANUFACTURING ACTIVITY INDEX 50.1 IN OCTOBER (CONSENSUS 50.0) VS 50.2 IN SEPT"
Victor Burek  :  "Aging baby boomers, those Americans born between 1946 and 1964, account for approximately half of the drop in the labor force participation rate since 2007, according to a report released Thursday from the White House Council of Economic Advisers. The remaining decline stems from “cyclical factors” fairly typical of historic economic recessions and more difficult-to-explain “residual factors” from the crisis."
Matt Hodges  :  "no, victor. UE is not attained, if you factor in participation"
Victor Burek  :  "you don't think the data justifies a higher rate than 0 to .25%?"
Matt Hodges  :  "nice write up, MG. interesting take on the Fed's headlong rush towards increasing the FF, at all costs, regardless of justifiable data."