MBS RECAP: Slightly Weaker Holding Pattern Ahead of NFP

By: Matthew Graham
  • Bonds slightly weaker overnight; no major drama
  • AM employment data (ADP and Jobless Claims) prompted more selling
  • Stock prices and bond yields bounced lower together at 10:30am
  • Bonds didn't make it back to positive territory but came close

By the end of the trading session, 10yr yields were less than 2bps higher and still in the "high 1.3's" (which has a nice ring to it).  Fannie 3.0s lost less than an eighth of a point and the only brisk move of the day was in a friendly direction as bonds quickly recovered from more gradual morning weakness.

When it comes to blaming something for that weakness, we don't really have to look any further than the past 8 days of amazing strength.  In fact, if we consider that yields hit new all-time lows on each of the past two sessions and that tomorrow's NFP report could easily inform the Fed rate hike outlook, it would have been fair to wonder why we hadn't seen a corrective bounce even sooner.

All that having been said, the morning's economic data provided good cover for bond markets to undergo that corrective bounce (i.e. stronger employment data makes a case for higher bond yields, even though yields probably wanted to go higher anyway).  

Almost as if by design, yields gravitated back toward the mid 1.38's by the end of the day--the previous all-time lows before this week.  Long story short, I see the past 2 days very much as a logical pause before the next act in the show.  As for the next move, it very well may be decided by NFP, provided we see a big enough departure from the 175k forecast.  


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
104-03 : -0-02
Treasuries
10 YR
1.3870 : +0.0020
Pricing as of 7/7/16 4:50PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
1:19PM  :  ALERT ISSUED: Keep Pipeline Control Reprice Risk in Mind
10:31AM  :  ALERT ISSUED: Negative Reprice Risk Already a Consideration For a Few Lenders
9:10AM  :  Slightly Weaker After Decent Employment Data

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Gavin Luckman  :  "was actually in pricing locking 3 loans. Got through the first 2, as I went to lock the third, I got an error stating that "Pricing has changed" and I was about .125 worse in price. 2 out of 3 ain't bad though."
Matthew Graham  :  "Very possible given probable increase in lock volume pre-NFP"
Chip Harris  :  "Seeing a few re-prices now. Odd timing. Maybe pipeline control?"
Sung Kim  :  "keep on locking everyone, will make tomorrow that much greener"