MBS RECAP: Suddenly, Bonds Are Back in The Game

By: Matthew Graham •

Granted, it would be a long shot, and it would require the rest of the week's data playing along, but bond markets are suddenly considering that the rest of 2015 doesn't necessarily have to be doom and gloom.  Reason being: doom and gloom for the long term economic outlook is a happy thing for fixed income.

Of course there's already quite a bit of long term doom and gloom baked into trading levels when the Fed is set to hike rates in a few weeks and only the shorter term yields seem to be responding.  Part of that is due to longer term yields already 'pricing in' the hike, but the bigger reason is that market participants just aren't seeing this hike as being made possible by a new age of economic prosperity--not by a long shot.

Today's Manufacturing PMI coming in at the weakest level since 2009 underscores that fact.  Then minds start wandering and wondering "what if the boatload of Fed speakers are less than bullish in the coming days and what if the week's remaining data is in the same vein as today's ISM data?  Why... then we'd be very much on the wrong side of the December trade!" 

The net effect is today's rally.  I wrote it up in more detail in the Mid-Day commentary.  In case you missed that, here it is.

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
100-26 : +0-11
FNMA 3.5
103-29 : +0-09
FNMA 4.0
106-11 : +0-07
Treasuries
2 YR
0.9110 : -0.0230
10 YR
2.1450 : -0.0630
30 YR
2.9030 : -0.0710
Pricing as of 12/1/15 5:42PMEST
Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
10:09AM  :  Bonds Improve After Weakest ISM Since 2009
9:58AM  :  Bonds Bounce Back to Green; Waiting on ISM
MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Jason Anker  :  "yea, find "should be used for schooling" in the 4000.1"
Jason Anker  :  "but often that money is given after the expense to reimburse the student. it's "theirs""
Matthew Graham  :  "RTRS - EVANS SAYS DOES NOT THINK U.S. IS IN A JAPAN-LIKE SITUATION, BUT WARNS INCREASING RATES TOO QUICKLY POSES RISK"
Jason Anker  :  "Nathan, I've used it before."
Jason Anker  :  "they know we're turning Japanees"
Nathan Stotlar  :  "FHA question - Borrower received a grant and scholarship from a college. Can that be used as cash to close??"
Matthew Graham  :  "RTRS - EVANS SAYS EXPERIENCE OF JAPAN, EURO ZONE SHOWS THAT IT IS TOUGH TO RAISE INFLATION WHEN RATES ARE NEAR ZERO"
Matt Hodges  :  "c'mon Fed...don't concede to actual reality...YOU create your own reality."
Matthew Graham  :  "RTRS - FED'S EVANS SAYS FED HAS TO ADMIT CERTAINTY ABOUT A LOT OF THINGS IN ECONOMY IS NOT AS GOOD AS IT SHOULD BE"
Matthew Graham  :  "RTRS - FED'S EVANS SAYS GLOBAL ECONOMY FACING LOW-INFLATION CHALLENGES"
Dominick Cordone  :  "my guess is 6 but I don't know the rest of the file...2 may work"
Mike Drews  :  "with 5% down DU purchase--How many months reserves is DU usually looking for when I receive a refer?"