MBS and Treasuries are both in distinctly stronger territory today after an overnight rally that reached it's zenith by 9am.  There are quite a few factors to credit for the strength.  In no particular order, these include:

  • PIMCO/Gross correction.  It stands to reason that Friday's bond market losses were a bit sharper than they otherwise might have been had it not been a Friday.  Investors were trying to get ahead of the expected redemptions in the world's largest bond fund.  The only available headlines on the topic this morning indicate less redemption demand than initially forecast. 
  • European Economic Data/ECB Frontrunning.  Econ data and inflation were generally soft overnight in Europe.  This didn't stoke any new rally demand, but kept the environment fertile for other factors.
  • Democracy Protests in China have generally been credited with fueling a "risk-off" trade overnight (sell stocks, buy bonds).
  • European periphery.  Remember Greece?  How about Spain?  These two countries were very much in the news in 2011-2012 during the Euro crisis and continue to experience aftershocks to this day.  No one is worried about an imminent systemic collapse of the Euro, but a lighter version of the same dynamic exists where the peripheral countries' debt sells off, thus benefiting core countries like Germany.  Greece has been in the news for wanting to exit its bailout plan early, and Spain for an independence vote in the Catalonia region.  Both bond markets got killed overnight, benefiting German and even US debt.
  • Month/Quarter-end buying/flattening.  A "flattener" is a Treasury trade that favors the longer maturities vs shorter maturities.  For instance, you wouldn't even have to put any new money to work in Treasuries in order to benefit 10yr Notes.  You could simply sell an equal amount of 2yr notes to shift your duration preference (i.e. where you want/need the average maturity of your portfolio to be).  Flatteners are in fashion this morning, and the "long end" of the yield curve has more direct benefit to MBS.
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
98-26 : +0-10
FNMA 3.5
102-12 : +0-08
FNMA 4.0
105-16 : +0-05
Treasuries
2 YR
0.5790 : -0.0080
10 YR
2.4820 : -0.0530
30 YR
3.1680 : -0.0480
Pricing as of 9/29/14 12:23PMEST
Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
9:12AM  :  Multiple Factors Conspire to Boost Bonds; Approaching 3-week Highs
Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Jason Anker  :  "APR epitomizes the lack of value from government intervention"
Gus Floropoulos  :  "I prefer the TIL/Itemization"
Gus Floropoulos  :  "the APR is very deceiving, as is the layout of the GFE"
John Rodgers  :  "APR is flawed because it doesn't account for lender credits.The whole idea of the APR was to allow the borrower to shop but the big boys lobbied to exclude the lender credit from the APR. Furthermore the number can be manipulated using the interim interest making it even more flawed (ref Cash Call commercials). "
Andy Pada, Jr.  :  "I always tell clients that the APR is way to show you the cost of doing business. Whereas the loan amount @ your Note Rate = your P&I; this is also reflected by the amount financed (loan amount minus finance charges) @ APR = your P&I. Same way of showing you the monthly payment be showing the borrower that he/she is financing some costs."
Hugh W. Page  :  "But that's partially the point. APR can be misleading so help clients understand that as simply as possible."
Alan Craft  :  "The problem is that no one knows at closing exactly how long they will be in the home. So the entire premise of the article is moot."
Hugh W. Page  :  "The point of the article is relevant and makes sense but unfortunately most consumers will look at you like you have 3 heads when you try to explain it."
Alan lacey  :  "that article in news stream about APR wasnt convincing."
Matthew Graham  :  "RTRS- U.S. AUG PENDING HOME SALES -2.2 PCT FROM AUG 2013"
Matthew Graham  :  "RTRS- U.S. AUG PENDING HOME SALES INDEX -1.0 PCT (CONSENSUS -0.1 PCT) TO 104.7 - NAR"
Hugh W. Page  :  "Gonna be an interesting week I think. So much going on...."
Matthew Graham  :  "RTRS- US AUG PERSONAL INCOME +0.3 PCT (CONS +0.3 PCT) VS JULY +0.2 PCT (PREV +0.2 PCT)"
Matthew Graham  :  "RTRS- US AUG PERSONAL SPENDING +0.5 PCT (CONSENSUS +0.4 PCT) VS JULY UNCHANGED (PREV -0.1 PCT)"