• Super light volume and participation
  • Data was overlooked (on-target GDP and weaker Existing Sales)
  • Oil and European yields pushed US rates a bit higher
  • US rates keep returning to narrow range centered on 2.22% 10yr yields
  • Today's weakness simply corrects 2 days spent in stronger territory

GDP was in line with the median forecast and the Existing Home Sales report was significantly weaker than forecast.  On balance, that suggests bond market strength, but bonds sold off today.  So right off the bat, we know we don't need to talk about market movement in the context of the data.

From there, let's just skip to the conclusion: there really IS NO CONCLUSION to be drawn from market movement when trading is as light as it was today (one of the 5 lightest days of the year, INCLUDING half days). 

In the bigger picture, it looks as if the consolidation pattern is set for the end of the year and was potentially set more than a month ago.  That's when the monthly moving average (center line in the chart) began to level-off around 2.22% in 10yr yields.  It hasn't moved much from there and today's bounce could easily be seen as a simple regression to that average after 2 days spent in stronger territory).

2015-12-22 Range Trade

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
99-26 : -0-01
FNMA 3.5
102-30 : -0-02
FNMA 4.0
105-18 : -0-02
Treasuries
2 YR
0.9770 : +0.0000
10 YR
2.2370 : -0.0020
30 YR
2.9560 : -0.0080
Pricing as of 12/22/15 7:05PMEST
Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
1:45PM  :  ALERT ISSUED: Negative Reprices Increasingly Likely
11:03AM  :  Curveballs: Bonds Weaker After Data, But Not Because of It
10:21AM  :  ALERT ISSUED: Some Negative Reprice Risk Already
MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Steve Chizmadia  :  "Pledged assets would be the only why that would even be remotely possible"
Gerry Suarez  :  "anyone out there hearing of 30 yr fixed rates in the mid 3's with no points?"
Matthew Graham  :  "It hit rock bottom after QE3 and has been very slowly edging higher/wider since then."
Matthew Graham  :  "just current coupon (subjective calculation of production MBS yields) vs 10yr yield."
Rich Liu  :  "MG, any particular spread you're looking at for signs?"
Matthew Graham  :  "10 at 1.5 = 30yr closer to 3.0, unless spreads start widening much faster"
Oliver Orlicki  :  "Then the 10 will go to 1.5% and the 30 year will go to 3.5ish"
Matthew Graham  :  "I think we'll see at least one reasonably scary selling spree in 2016 as markets realize that the rate hike isn't the end of the world. Reality will set in eventually though"
Oliver Orlicki  :  "They are crazy. Be shocked if we see above 4.25 for most of the year"
Matthew Graham  :  "RTRS- FREDDIE MAC SAYS EXPECT TOTAL HOUSING STARTS TO INCREASE 16 PERCENT YEAR-OVER-YEAR AND TOTAL HOME SALES TO INCREASE 3 PERCENT IN 2016"
Matthew Graham  :  "RTRS- FREDDIE MAC SAYS EXPECT HOUSE PRICE GROWTH TO MODERATE A BIT TO 4.4 PERCENT IN 2016"
Matthew Graham  :  "RTRS- FREDDIE MAC SAYS EXPECT THE 30-YEAR FIXED-RATE MORTGAGE TO AVERAGE BELOW 4.5 PERCENT FOR 2016 ON AN ANNUALIZED BASIS"
Hugh W. Page  :  "Just saw November stats for Palm Beach County Real Estate market. Sales up and median sale price increased 11.3% year over year. And, I'm still doing at least a couple of foreclosures every month still....when will it end :)"
Ted Rood  :  "I've had taxes on new construction based on an estimate from title company rather than prior bill for the lot only. Guess you could use that as an example to somewhat justify using the projected taxes."
Rich Cordova  :  "Thanks T.R. the underwriter is stating we need an actual tax bill I was just hoping maybe someone had dealt with it before and had some guidelines to reference."
Ted Rood  :  "sounds like an underwriting or closing manager call on that, RC. Typically need actual bill, not letter stating projected future taxes."
Rich Cordova  :  "I have a client who didnt file their primary residence exemption with the county assessor so last year they got billed as a second home. We are now trying to refinance but the underwriter is saying we have to base the taxes collected off of the previous years rate. The client has gone to the county and got a letter stating what the taxes will be for 2016 can we use that to adjust the tax rate or does it have to be an actual tax bill? The county cant provide a tax bill till the end of the year so we would need to over collect till October if the letter wont work. Any one deal with this before?"