MBS RECAP: Uneventful Visit to Weakest Levels in Months

By: Matthew Graham

Bond markets kept on doing what they've been doing every day so far in November: selling-off.  Actually, if you'd like to look at it in slightly more positive terms, you could say that we're in the midst of "repricing a Fed rate hike."  It just so happens that said "repricing" is accomplished via the aforementioned sell-off. 

Today's was much gentler than Friday's, which had the big impact from the ferociously strong jobs report.   In fact, today's weakness might even have looked a tad resilient.  Reason being: there was a significant amount of corporate bond issuance, with over $15 billion hitting the market today alone.  Add that to the similarly busy day on Friday, and you have a meaningful addition to the week of Treasury debt supply (3, 10, and 30yr auctions).  The fact that bond markets are closed on Wednesday only compounds the supply pressure.

In that light, the 2.38bps rise in 10yr yields and the 6/32nds drop in Fannie 3.5 prices doesn't seem too terrible.  Also, the apex of the weakness was in the books by 10am as the glut of corporate announcements had mostly run its course.  That left the rest of the day to hold calmly sideways at the new, weaker levels, but notably without the same sort of relentless drive toward higher yields seen on previous days of the selling streak.


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
99-26 : -0-08
FNMA 3.5
103-04 : -0-06
FNMA 4.0
105-26 : -0-06
Treasuries
2 YR
0.8900 : +0.0000
10 YR
2.3490 : +0.0238
30 YR
3.1140 : +0.0279
Pricing as of 11/9/15 5:15PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
9:47AM  :  ALERT ISSUED: Some Risk of Negative Reprices From The Super Early Lenders
9:42AM  :  Winter is Coming; Markets Set About Storing Nuts (Cash)

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "pretty methodical, no?"
Matthew Graham  :  "at taper time, they said it would be a while until hike, but markets clearly knew we were heading in that direction. For a great look at this, pull up a 5yr chart of 2yr Treasuries"
Matthew Graham  :  "One thing at a time. They had to taper first."
Victor Burek  :  "agreed, many data points are worse, like the manufacturing reports"
Ross Miller  :  "they should have raised about 2 years ago but didn't I just don't want to hear BS like this, "FED'S ROSENGREN SEES 'REAL IMPROVEMENT' IN ECONOMY SINCE OCTOBER FOMC MEETING""
Matthew Graham  :  "not only that, but it's a marked shift in tone from Rosengren. Same story with Evans earlier. The doves are capitulating."
Andrew Horowitz  :  "seems he is just piling on at this point MH"
Matt Hodges  :  "he's unaware of all of the fed speak on Friday?"
Matthew Graham  :  "RTRS - FED'S ROSENGREN: WORST OF FOMC'S SEPTEMBER GLOBAL OUTLOOK, MARKET CONCERNS HAVE NOT MATERIALIZED"
Matthew Graham  :  "RTRS - FED'S ROSENGREN SAYS COULD BE APPROPRIATE TO RAISE RATES IN DECEMBER"
Matthew Graham  :  "Heck, even if there were no holiday, you couldn't really rule anything out. Remember, the only thing you can have any meaningful degree of control over is the INTRADAY reprice risk situation. Once you start trying to get ahead of where things will be tomorrow and beyond, things get much less predictable"
Andrew Horowitz  :  "and if I can add we did just have a rather big beat in the number that tends to set the trend for the following month this past Friday"
Matt Hodges  :  "or...we could have a relief rally at 1:01:30 tomorrow"
Matthew Graham  :  "At the risk sounding trite, there's really always a chance of a sell-off. We have supply and a holiday this week. While that doesn't necessarily mean bonds will weaken further, it increases uncertainty about how investors will approach the 2nd half of the week."
Lenny Ujkic  :  "Any chance we get a sell off?"