Here's the latest alert from MBS Live:
MBS Under Pressure at US Stock Open, Hit Lows of The Morning 10:09AM
At the 9:30am US Stock Market open, S&P's shot about 10 pts higher in mere minutes. Combined with ongoing weakness in German Bunds, that dragged Treasury yields higher and MBS to their lows of the morning. Even so, it looks like 10yr yields are making their first attempt at a 1.95% bounce, in line with Wednesday's high yields, and MBS looking back a bit further to 101-18 support from the morning of the 21st. Fannie 3.5's are already back up to 101-22, but illiquidity can result in choppy moves in either direction. Given the low volume, futures rollovers, and limited market guidance, we'd remain hesitant to read much into today's trading levels. That said, the weakness can and will have an effect on lender pricing this morning.
Here's a chart that shows the post 9:30am movement in 10yr yields and stock futures. If the volatility was driven by a headline or an event, we would have seen these two surge in unison, but instead, stocks clearly lead bonds both in movement and volume:
Although MBS are off their lows, Fannie 3.5's now seem to be contending with the previously supportive 101-23 as overhead resistance as seen in the video below. Meanwhile, 10yr yields are trying to contain the weakness at Wednesday's high yields.
Even if MBS continue to struggle with 101-23, the broader trends wouldn't suggest that's too much of a concern. Things are generally status-quo inside the following two lines and lender pricing has been little changed while MBS have operated in this range:
Here's a longer term look at the 1.95 level in 10yr yields:
And for reference, some of the other pivots in play heading into the weekend (particularly, note the 1.877 area which seems to act as a "last call" of sorts, where rallies can bounce without too much drama, but once broken, the suggestion leans toward a more frantic flight-to-safety into the 1.7's):
Here's a look at the blow out in Bund yields (yellow) dragging Treasury yields (green) higher
In addition to German Bunds and other European concerns, Treasuries will continue to keep an eye on domestic stocks as well. To that end, S&P's look as if they're trying to decide if they'll adhere to the recent downtrend or if things will get even worse: