MBS RECAP: Decent Recovery Intraday but Broader Themes Intact

By: Matthew Graham

If you're just looking at the 2-day chart, bond markets did a decent job of pushing back toward positive territory today.  That was especially true for MBS, which actually made it back into positive territory while Treasuries remained under more pressure due to the day's hefty corporate debt issuance.  Treasuries are more affected by the corporate bond market because they serve as the index for corporate bond pricing.  As such, they can be sold in order to insulate firms from rate volatility during the issuance process.

If you're looking at anything longer than a 2-day chart, things are still pretty depressing.  Both MBS and Treasuries hit their weakest levels since September before bouncing back in the afternoon.  As for the weakness and the rally, these were merely minor brushstrokes in the bigger picture.  Following last week's FOMC Announcement, bond markets have been intent on moving to higher yields before tomorrow's NFP, with minor adjustments to account for whatever Yellen ended up saying on Wednesday.

That goal (of moving higher in rate) was arguably accomplished today when 10's hit 2.263--close enough to the 2.27 target I laid out last week after we broke 2.13.  I wish that meant I were clairvoyant, but instead it merely means that bond markets are scared and anxious--thus moving somewhat predictably between known waypoints on well-worn paths.  Tomorrow's NFP probably isn't the epic event that some news articles seem to think it is, but if it's ridiculously low and bad, it could cause a partial rethink of the Fed's trajectory.  I'll talk more about that and other possibilities in tomorrow's Day Ahead commentary.


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
100-20 : +0-02
FNMA 3.5
103-25 : +0-03
FNMA 4.0
106-09 : +0-03
Treasuries
2 YR
0.8300 : +0.0140
10 YR
2.2360 : +0.0090
30 YR
3.0020 : +0.0100
Pricing as of 11/5/15 5:23PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
11:17AM  :  ALERT ISSUED: Edging Into Negative Reprice Risk Territory
10:30AM  :  New Lows for MBS. Same Theme, Different Day

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Don Davidson  :  "I agree, just wanted anothers opinion on that."
Matthew Graham  :  "It would have to catastrophically miss"
Matthew Graham  :  "No I do not Don"
Don Davidson  :  "MG, if the NFP doesn't meet expectations, do you think there would be a little relief?"
Matthew Graham  :  "RS, waiting for NFP is always a dice roll. I'd freel pretty defensive ahead of this one. It's hard for me to answer though because I think last Wednesday afternoon was a pretty clear signal. If you didn't lock then, there's less incentive now as I think markets have done a lot to price in an acceptable NFP. I still wouldn't underestimate the ability for the sell-off to continue if the number is decent."
John Paul Mulchay  :  ""Should I have locked Monday?""
Hugh W. Page  :  ""You must ask yourself one question.....""
Robert Siler  :  "lock today or wait unitl NFP tomorrow?"
Andy Pada, Jr.  :  "Yes, it hurts credit"
John Tassios  :  "doesn't it hurt credit too and reduce FICO if you did a HAMP?"
Compliance is Watching Me  :  "I am not a HAMP expert either, but the first thought when I read that was it had to be part of a settlement of some sort."
Hugh W. Page  :  "So borrower who did a HAMP Mod (only rate/term mod) several years ago. Due to timely payment history, B of A now starts giving them a $1,000 credit to principal and then a $5,000 credit to principal in December. Correct me if I'm wrong but doesn't this create a problem now for a refinance? I'm no HAMP expert."