The day started out well for Treasuries and MBS for a variety of reasons.  European bond markets have been the most reliable motivation for overnight movement in Treasuries and last night was no exception.  This time around German Bund yields (a good benchmark for overall "EU bond markets") pushed into new all-time lows.

The correlation with Treasuries was stark.  10yr yields saw their highest levels of the night just seconds before EU bond markets opened.  Yields began moving lower right at the open and Treasuries followed immediately.  Both EU and US trading leveled off by 5am, and then it was Treasuries' turn to lead.

A glut of month-end buying came in just after 8:30am, and this in turn started a snowball of bond buying that further extended the gains.  The early morning positivity helped MBS get off to a good start and Fannie 3.5s ultimately made it as high as 102-18 (6 ticks up vs yesterday). 

Bond markets turned a corner tentatively into the 9am hour, and losses accelerated after a much stronger than expected Consumer Confidence report.  We also can't rule out some hesitation ahead of the 1pm 5yr Note auction.  The pull-back just recently brought MBS back to unchanged levels, introducing some negative reprice risk.

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
98-18 : +0-01
FNMA 3.5
102-12 : +0-01
FNMA 4.0
105-16 : -0-01
Treasuries
2 YR
0.5512 : +0.0472
10 YR
2.4835 : -0.0075
30 YR
3.2466 : -0.0164
Pricing as of 7/29/14 12:39PMEST
Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
12:14PM  :  ALERT ISSUED: Bond Markets Under Pressure; Negative Reprice Risk Approaching
10:24AM  :  Consumer Confidence MUCH Stronger Than Expected, adding to Bond Market Pull-Back
9:03AM  :  Bond Markets Surge as Domestic Session Begins, Here's Why...
Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "With respect to Russia sanctions, nothing too exciting at the moment. It looks like the announcement hit equities (stocks). More often than not (but with notable exceptions) falling stock prices can coincide with falling bond yields. This dynamic tends to have a more direct effect on Treasuries, but MBS get to come along for that ride a bit. To whatever extent they do, there's a small positive implication for rate sheets, but we haven't seen enough movement yet today to expect positive reprices. If anything, the resilience helps avoid a negative reprice situation."
Carlos Miranda  :  "How does this all translate into mortgage rate pricing for now? "
Matthew Graham  :  "RTRS - EUROPE SANCTIONS AGAINST RUSSIA TO INCLUDE OIL SECTOR, DUAL-USE GOODS, DEFENCE, SENSITIVE TECHNOLOGY; TO BE REVIEWED AFTER 3 MONTHS-EU DIPLOMAT"
Victor Burek  :  "any teeth to the sanctions?"
Matthew Graham  :  "Stocks sliding on EU/Russia sanctions announcement"
Gary Bracht  :  "I'm amazed that these numbers are so high, there is a paradigm shift going on now especially in terms of consumer optimism but not desire to purchase homes (or with any sense of urgency let's say.)"
Matthew Graham  :  "RTRS- US JULY CONSUMER CONFIDENCE INDEX HIGHEST SINCE OCTOBER 2007"
Andy Pada, Jr.  :  "so far not a big response"
Victor Burek  :  "wow"
Matthew Graham  :  "RTRS- US JULY CONSUMER CONFIDENCE INDEX 90.9 (CONSENSUS 85.3) VS JUNE REVISED 86.4 (PREVIOUS 85.2) - CONFERENCE BOARD"