MBS Pricing Snapshot

European benchmark debt with well-bid from the start of the European session, with 10yr German Bund yields already pushing all time lows before any news really hit. Markets were then generally assumed to be waiting on the outcome of the Spain bailout talks earlier this morning. In the meantime, supporting headlines and trading helped build a case for rallying further into the Spain news. For instance, the CSU party in Germany, although only holding 44/620 seats in Germany's legislative Bundestag arm, reminded markets that Europe is indeed "not fixed" in threatening to reject any Greek efforts to renegotiate its bailout and going a step further to say they supported a Greek exit.

But such soap-opera-ish headlines were minor players to the simple tradeflow developments overnight as peripheral debt spreads widened to core EU debt. German Bunds pushed further into new all-time lows which, as we've discussed, is going to create spillover buying for US debt. Indeed that has been the case as 10yr yields have traded between 1.48 and 1.46 so far this morning, and MBS push into new all time highs with Fannie 3.0's comically close to the "never-thought we'd see it" 104-00.

Earlier this morning, when Spain's bank bailout was finally approved with the condition that Spain would retain full responsibility, Bunds rallied further (down to 1.16) in fact, leading domestic 10's to their lowest yields of the morning's range. All things European have clearly stepped up to trump anything from the domestic earning's calendar as stocks have merely followed bonds (which in turn merely follow Bunds...).

The rest of the day's calendar is empty, so the afternoon becomes about whether or not we can hold the early EU-inspired gains after the EU session ends.