MBS RECAP: Bond Sell-Off Continues, Now With 1.53 Times More Anxiety

By: Matthew Graham

The very next day after Brexit headlines sunk 10yr yields to long-term lows in late June, we began talking about "1.53%" in 10yr Treasury yields.  This was as much weakness as could be mustered before yields continued their journey toward all-time lows.  Yields bounced near 1.53 on several subsequent occasions but never broke firmly through.  This, then, became our ad-hoc ceiling for yields in the short-medium term. 

From the 1.3's last week, rates have risen quickly back to the 1.53 inflection point  and stopped there almost perfectly today.  That leaves us in a precarious position where any further weakness tomorrow will essentially be making a case for a more prolonged move higher, but where we still have the hope that 1.53 can continue to hold as the perfect little ceiling under which rates can continue making sense of the new normal.

In terms of specific events driving today's weakness, the most notable was the 1pm 10yr Treasury auction, which utterly flopped.  Apart from that, traders are trading big-picture themes as the broad notion of "risk" makes a comeback after its post-Brexit bottom.  In other words, things like stocks, European bond yields, oil, and British currency have all been moving higher together. 


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
103-26 : -0-09
Treasuries
10 YR
1.5070 : +0.0730
Pricing as of 7/12/16 6:41PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
1:04PM  :  ALERT ISSUED: 10yr Auction an "F"; Reprice Risk Increases
11:42AM  :  ALERT ISSUED: Negative Reprices Becoming More Likely
9:39AM  :  ALERT ISSUED: Negative Reprice Risk Already Potentially Increasing

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Steve Chizmadia  :  "If anything, more of a joke as the LO's here get giddy with low rates and have unrealistic expectations of rates always going lower with no minor corrections or pull backs over the course of time."
Daniel A. Kramer  :  "steve, how do you expect me to sell 30 yr fixed rates if they move from 3.25% back to 3.375%????? how????? :)"