MBS RECAP: All-Time Treasury Lows For No Specific Reason

By: Matthew Graham
  • 10yr yields traded well into the 1.3's, surpassing previous low of 1.381
  • No specific motivation at home or abroad, though there are several supporting actors
  • It's the big-picture "global growth concerns" that get us in the vicinity of all-time lows
  • More focused considerations push us around once we're there.

If you think about all-time lows in rates as a far away city, "global growth concerns" (GGC, to save space) would be like the plane that gets you there and the day-to-day economic headlines would be like the rental car you drive around town.  I bring this up because in these cases, we find ourselves talking about "all-time lows" as if they're somehow driven by the shorter-term considerations.

For instance, there was weak data in China overnight, a big drop in oil, more weakness in UK currency, slumping stocks, and ultimately weak data in the US this morning.  Did these things cause today's all-time lows?  Not even remotely!  They merely pushed markets around a town they wouldn't even be in if it wasn't for the jumbo jet (aka, GGC).  

MBS continue to underperform the massive bond market rally, which is pretty normal when Treasuries are pushing all-time lows or even if they're just making big moves lower.  One thing to keep in mind is that MBS prices aren't even close to being back to 2012 levels.  That's a factor of the Fed's decaying MBS portfolio among other things and it's been happening very slowly, steadily, and predictably since markets worked out the initial volatility surround the 2012 QE3 announcement.   All that to say, yes, 10yr yields hit new all-time lows, but we're not even close to expecting mortgage rates to follow suit without MBS gaining about another point in Fannie 3.0s.


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
104-07 : +0-11
Treasuries
10 YR
1.3730 : -0.0880
Pricing as of 7/5/16 3:59PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
2:43PM  :  The Return of the 2.5 Coupon!
11:12AM  :  Bonds Blow Through Previous All-Time Lows

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "so, today, then?"
Justin Bayle  :  "I've got 3.25 at 0 points this morning, just quoted it"
Christopher Stevens  :  "Bigger meaning will be when banks start showing 3.250-3.125 rates at 0 points"
Matthew Graham  :  "it's just a thing... no huge meaning"
Patrick Moore  :  "It's happening!"
Matthew Graham  :  "
MBS Live Update Issued [+VIDEO]
The Return of the 2.5 Coupon!"
Gus Floropoulos  :  "COF-cost of funds"
Matthew Graham  :  "ARM pricing is not driven by securities prices for most lenders. So strategies vary widely depending on lenders' balance sheet needs/wants/goals."
Jack Arney  :  "Not sure if this was asked yet this morning but jumbo arm pricing doesn't seem to be following everything else. My pricing is slightly higher than where things were in our last drop a few months back that last for a day. Anyone got any ideas why?"
Sung Kim  :  "people have been scared about the next generation for about 10 generations now?"
George Christo  :  "I am so scared for the next generation having to clean up this mess. OMG. Make hay while the sun's shining in originations, but while I can wrap my head around this yield given other markets, what's the equivalent of terminal velocity for rates?"
Christopher Stevens  :  "just wow is all I have to say at 1.358"