MBS Live: MBS Morning Market Summary
Both Treasuries and MBS are weaker at the moment after hard-fought volatility this morning. Immediately following the NFP release, both sides of the market changed rapidly from positive to negative, and back to positive before ultimately taking their ball and going home. The pricing snapshot below is outdated (for the same reasons it has frequently been outdated in May/June: MBS Live alerts and analysis taking precedence)and Fannie 3s are how down 14 ticks to 100-09 and 3.5s are down 9 ticks to 103-11. This is still fairly well above yesterday's lows and certainly well within the medium term range leading up to NFP, but the move lower was enough to inspire several negative reprices so far this morning (the first alert was 8:45am with the first reprice at 9:39am). There's no remaining data today and now in addition to yesterday "changing nothing," today looks to have similarly changed nothing about the recent range, though it might be less well-behaved between now and the next major event, June 19th's FOMC Announcement.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
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Pricing as of 11:06 AM EST |
Morning Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts and updates issued via email and text alert to MBS Live subscribers this morning.
10:42AM :
Mid-Morning Consolidation Giving Way to Weakeness. MBS Outperform Though!
Whereas equities have made a "higher high" just now vs the last high at the 9:30am open, Treasuries look to be making a "lower high" vs the same time (2.136 moments ago vs 2.14 at 9:30). That's been good new for MBS, bringing Fannie 3s up from 100-06 to 100-15 currently, which is 8 ticks lower on the day. Fannie 3.5s are 5 ticks lower on the day at 103-15.
Bond markets aren't out of the proverbial woods yet, but off the previous lows. Now that the first hour of cash trading is out of the way for stocks, we might see the stock lever hook back up a bit before the post-lunch hours open the door for a divergence (lighter liquidity and position clean-up heading into the weekend).
On a final note, "triangles" are forming in both MBS and Treasuries (consolidating range, or "higher lows" and "lower highs"). The result of the triangle break may give us an early indication of whether or not current levels will be a floor or ceiling for the rest of the day, but the next test would be at the morning's previous highs just over 2.14 anyway. In other words, if we see a meaningful break higher in 10yr yields, it suggests 2.13 as an intraday resistance level. A break over 2.14 would be more disconcerting.
(I was just about to send out this alert when 10's began breaking over 2.13, and are up to 2.1414 already (about 60 seconds ago), so that's a net negative indication and we're now watching the morning's previous highs at 2.14. Holding so far, but only barely. MBS have given up a few ticks. Volatility hasn't quite died down yet.
Bond markets aren't out of the proverbial woods yet, but off the previous lows. Now that the first hour of cash trading is out of the way for stocks, we might see the stock lever hook back up a bit before the post-lunch hours open the door for a divergence (lighter liquidity and position clean-up heading into the weekend).
On a final note, "triangles" are forming in both MBS and Treasuries (consolidating range, or "higher lows" and "lower highs"). The result of the triangle break may give us an early indication of whether or not current levels will be a floor or ceiling for the rest of the day, but the next test would be at the morning's previous highs just over 2.14 anyway. In other words, if we see a meaningful break higher in 10yr yields, it suggests 2.13 as an intraday resistance level. A break over 2.14 would be more disconcerting.
(I was just about to send out this alert when 10's began breaking over 2.13, and are up to 2.1414 already (about 60 seconds ago), so that's a net negative indication and we're now watching the morning's previous highs at 2.14. Holding so far, but only barely. MBS have given up a few ticks. Volatility hasn't quite died down yet.
9:30AM :
ALERT ISSUED:
MBS Hit Lows of The Day
Not that rate sheets are out yet, but for those of us with access to yesterday's prices, just a heads up that Fannie 3s are down 16 ticks to 100-07 and 3.5s are down 11 ticks at 103-09. 10's are up to 2.123, which isn't much higher than previous highs. It's still not a foregone conclusion that we sell-off catastrophically from here, but at the lows for now.
8:45AM :
ALERT ISSUED:
Risk Universe Reverses, MBS/TSYs Into Negative Territory
The bounce mentioned in the last alert has held, and also coincided with bounces in related risk markets (Euro, Bunds, Yen, Equities). 10's shot up to 2.12, back to 2.10 and back to 2.12 fast enough that I've had to rewrite this sentence 7 times despite typing 100wpm. MBS are leaking badly with Fannie 3's down 7 ticks to 100-16.
8:38AM :
ALERT ISSUED:
NFP + 175k vs 170k Forecast, Bond Markets Fighting For Green
There probably wasn't any possible NFP result that would have given markets more to think about this morning. The headline is right in line with consensus, and last month was revised minimally lower. Bond markets were stunned for roughly 3.5 minutes, with both MBS and Treasuries holding steady at unchanged levels.
But then 10's shot lower from 2.095 to 2.05 in the blink of an eye and MBS perked up and paid attention, moving quickly up to 100-28 momentarily. Both MBS and TSYs have ALREADY BOUNCED unfortunately, and we're back to fighting for unchanged levels.
This is an exceptionally choppy reaction to the NFP print, but in the big picture that's not a bad thing considering we were coming into it at the lows of the pre-NFP range. More to come as the reaction unfolds...
But then 10's shot lower from 2.095 to 2.05 in the blink of an eye and MBS perked up and paid attention, moving quickly up to 100-28 momentarily. Both MBS and TSYs have ALREADY BOUNCED unfortunately, and we're back to fighting for unchanged levels.
This is an exceptionally choppy reaction to the NFP print, but in the big picture that's not a bad thing considering we were coming into it at the lows of the pre-NFP range. More to come as the reaction unfolds...
Live Chat Featured Comments
A recap of the featured comments from the MBS Live Dashboard's Live Chat feature, utilized by hundreds of industry professionals each day.
Scott Valins : "sheets about .25 worse than yesterday's last one"
Matthew Graham : "Good question Noah. Sometimes it can just be market-making, as buyers and sellers quotes have an effect on the price feed in addition to trades. If a buyers is throwing out a lowball bid or seller throwing out a high offer price, we can see jumps."
Noah Thompson : "What causes the major jumps an drops?/ + 6 ticks in one jump is it low volume? or large purchase amounts? "
Eric Franson : "REPRICE: 9:39 AM - Wells Fargo Worse"
Michael Gillani : "Most economists agree that bonds/mbs were oversold on taper talks coming into today so why more sellling on an on target number?"
Christopher Stevens : "so more volatility and range trading ahead of us. I would have rather had a number further from the forecast in either direction. Seems like 2.07 still a strong floor."
Jeff Anderson : "Along with the Yen drop I think the market was pricing in a weaker number yesterday. "
Jeff Anderson : "Agreed, Hugh. At least that's my take. Well seecwhat the traders feel."
Hugh W. Page : "Inflation subdued and below Fed Target plus Unemployment Rate up AND number of Unemployed and Discouraged Workers essentially unchanged means Fed will not move anytime soon IMO."
Scott Rieke : "Look at the disparity of between 3s and 3.5's - that tells you something."
Jeff Anderson : "This number works for both sides of the argument. The market can't make up its mind yet."
Scott Valins : "my concern is everyone was expecting a weaker number and we didn't get it. The only hope is for focus on the downward revisions"
Gus Floropoulos : "with the recent selloff in mbs, perhaps todays # was baked in to be stronger (Bernanke talking about tapering maybe sent a message that this # would be a huge beat)"
JRS : "Reminds me of watching my significant other trying to hit a golfball....so many swings"
Matt Hodges : "more discouraged getting back into the marketplacce"
Hugh W. Page : "Higher Labor Force Participation Rate is reason for uptick in Unemployment Rate. Market could take at as a sign workers are a little more confident they can find jobs. "
Scott Valins : "really tough numbers to trade"
Adam Dahill : "Split decision. Push "
Niccolo Satullo : "it's like traffic on the highway...we expect explosions...and it ended up being someone pulled over"
FPH : "I think we rally on this. +6-10 range by days end. "
Victor Burek : "maybe this will allow mbs to tighten to 10yr"
FPH : "Uptick in rate should help us. "
Matthew Graham : "RTRS- U.S. MAY AVERAGE WORKWK ALL PRIVATE WORKERS 34.5 HRS (CONS 34.5 HRS) VS APRIL 34.5 HRS (PREV 34.4 HRS), FACTORY 40.8 VS 40.7, OVERTIME 3.3 VS 3.3 "
Scott Valins : "lets see hours worked"
Matthew Graham : "RTRS- U.S. LABOR FORCE PARTICIPATION RATE 63.4 PCT IN MAY VS 63.3 PCT IN APRIL "
Matthew Graham : "RTRS- U.S. MAY JOBLESS RATE 7.6 PCT (CONSENSUS 7.5 PCT) VS APRIL 7.5 PCT (PREV 7.5 PCT) "
Matthew Graham : "RTRS- US MAY PRIVATE SECTOR JOBS +178,000 (CONS +180,000), APRIL +157,000 (PREV +176,000) "
Jason Anker : "rate and revision negaie"
Victor Burek : "lower revision might help"
Tim McNerney : "175k 7.6"
Matthew Graham : "RTRS- U.S. MAY NONFARM PAYROLLS +175,000 (CONSENSUS +170,000) VS APRIL +149,000 (PREV +165,000), MARCH +142,000 (PREV +138,000)"
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