MBS RECAP: Modest Gains and More Consolidation for Bonds

By: Matthew Graham •

This will largely be a rehash of the Mid-Day commentary as it captured all of the day's relevant themes.  The themes in question are at least threefold.  They include Europe, "positional" considerations, and reaction to the Fed (both immediate and ongoing).  A case could be made for several other themes, not the least of which would be corporate debt issuance, but these are the big three that I saw today.

Europe is clearly helping bond markets, though clearly not as much as we'd like.  Whereas Treasuries bounced at the beginning of this  week and have been sideways since then, European bonds have continued to rally.  Too, we're increasingly seeing pressure in the afternoon shortly after European markets close.  This was a factor today, and indeed we pulled back in the afternoon.

The fact that bonds remained in the green had to do with the positional considerations.  Namely, traders have been short (meaning they've sold bonds short in order to bet on rates moving higher).  Whether it has to do with some of the oddly dovish components of yesterday's Fed Minutes or the rapidly approaching holiday week, traders are cashing in those positions.  In the case of short positions, traders cash in by buying bonds--thus the boost in the morning. 

Definitively absent from this catalog of themes is any major reliance on economic data to provide guidance for bond market trading.  Today wasn't really the best test case for such a theme, considering the data was fairly close to consensus on all accounts.  Still, the stronger Philly Fed Index had the opposite suggestion from the actual price action, so if markets cared about data, it wasn't as much as they cared about the bigger themes. 

Despite the afternoon pullback, 10yr yields ended 2.7bps lower and Fannie 3.5s picked up 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
100-09 : +0-06
FNMA 3.5
103-14 : +0-04
FNMA 4.0
106-01 : +0-03
Treasuries
2 YR
0.8920 : +0.0120
10 YR
2.2460 : -0.0270
30 YR
3.0070 : -0.0360
Pricing as of 11/19/15 5:18PMEST
Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
10:20AM  :  Bond Markets Following Post-Fed 'Risk-Off' Trade
MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Dominick Cordone  :  "here is the quickest way to get transcripts....copy and paste: Call 1-800-908-9946 press (1) for English give your Social Security Number when prompted, and give the street number of the address on the your tax returns. Listen to the automated message and when it prompts you to submit an order by pressing (1) DON'T Instead hit zero (0) and speak to an operator. You can now request through the operator a faxed copy of any years transcripts needed. The operator will ask you questions that pertain to your tax return file that only you would know but after confirming you are who you say you are your returns will be promptly faxed to you"
Sung Kim  :  "no joke, it's quite a robust search feature"
Matthew Graham  :  "Thank you SK. And I agree. Some of you may have tried search in the past and not found what you were looking for. We made significant improvements (including the ability to use "quotes" to search specific terms, which is the most important capability in my mind). Anyway, it works really well now. Don't forget you can "view comment in chat log" to see the surrounding discussion."
Sung Kim  :  "i just used the site's awesome search feature and was able to find several chats discussing this - just in case it is after hours and no one is on"
Matthew Graham  :  "RTRS - LOCKHART SAYS FED WAS SUCCESSFUL IN OCTOBER STATEMENT IN PULLING MARKET EXPECTATIONS OF A RATE HIKE FORWARD TO PRESERVE CENTRAL BANK'S "OPTIONALITY" TO MOVE IN DECEMBER"
Timothy Baron  :  "Now it only mentions receiving them by mail."
Timothy Baron  :  "DC, this is the site where borrowers used to be able to get transcripts online: https://www.irs.gov/Individuals/Get-Transcript"
Dan Clifton  :  "anyone know if the on-line ability for borrowers to order their 4506-ts is running again, the IRS had turned it off due to fraud. And if so do you have the link?"
Matthew Graham  :  "you can always drop-down the "my change" column to your rate sheet print time and see the exact improvement"
Matt Hodges  :  "likewise, you have time to wait it out intra-day"
Matt Hodges  :  "i wouldn't count on one"
Kevin Danforth  :  "Are we due a re-price or was most of this green on the board when rate sheets came out? Logging in late today and have an app to lock"
Matthew Graham  :  "RTRS - LOCKHART SAYS RATE PATH AFTER INITIAL HIKE MAY BE "SLOW" AND "HALTING" AS FED FEELS ITS WAY TOWARDS A POTENTIALLY LOWER EQUILIBRIUM"
Matthew Graham  :  "RTRS - LOCKHART SAYS FED'S RATE "LIFTOFF" CRITERIA FOR LABOR MARKETS HAS BEEN MET, EXPECTS INFLATION TO PICK UP AMID LITTLE EVIDENCE THAT DISINFLATION IS LIKELY"
Christopher Stevens  :  "Eric Stoddard, EVP National Correspondent Manager just stated Wells does not have an issue with MSA's that a Correspondent chooses to use. It is upto the Correspondent to determoine if they want to take on hat to the risk and exposure."