The overnight session was much less interesting for Treasuries today (compared to yesterday).  In the sense that European bonds weren't pushing yields higher, it was a much better set-up for the day.  But in the sense that Treasuries weren't responding to a moderate rally in European bonds or declines in oil prices, it was also a bit ominous

Bonds maintained their sideways tack despite supportive performances in other markets (falling stocks and oil prices).  This was ostensibly due to anxiety over the afternoon's 7yr Treasury auction.  The results and subsequent trading corroborate the 'anxiety' thesis.  Despite an exceptionally weak auction, bonds actually rallied modestly, but noticeably in the last 4 hours of the trading day. 

The net effect was a 1.5bp gain in 10yr yields and just over an eighth of a point in Fannie 3.0 and 3.5 MBS.  Given that much of the improvement came after initial rate sheets, quite a few lenders repriced--albeit from the conservative holiday baseline price levels.

Tomorrow is a half day with bond markets closing at 2pm ET.


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
99-25 : +0-04
FNMA 3.5
102-31 : +0-05
FNMA 4.0
105-21 : +0-05
Treasuries
2 YR
1.0750 : -0.0200
10 YR
2.2940 : -0.0130
30 YR
3.0370 : -0.0040
Pricing as of 12/30/15 5:58PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
11:04AM  :  Small Improvement After Pending Sales, But Challenges Ahead

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "They have a certain amount to cover that's been previously announced. Some traders make plans based on the previously announced schedule. As to why they don't just redistribute it to the rest of the year, I'd say that likely has to do with the fact that there is only 1 instance of each auction per month. They could have pushed this earlier in the month, but not without creating too much concentration of supply earlier. I'm guessing they COULD rework the schedule, but this is the easiest way to do it."
Matt Hodges  :  "why not last week or next week?"
Hugh W. Page  :  "Debt needs to be acquired on a continual basis"
Matt Hodges  :  "mg - like traders lack of action this week, why should the treasury even hold auctions this week?"
Victor Burek  :  "at least supply is over"
Victor Burek  :  "yuck"
Matthew Graham  :  "1pm yield expectation was 2.152, and recent average bid-to-cover was 2.5-ish, so another weak action. D+"
Matthew Graham  :  "RTRS - HIGH YIELD AT LATEST 7-YEAR NOTE SALE WAS LESS THAN 1 BASIS POINT ABOVE ITS 1 P.M. WHEN-ISSUED LEVEL - REUTERS DATA"
Matthew Graham  :  "RTRS - U.S. 7-YEAR NOTES BID-TO-COVER RATIO 2.34, NON-COMP BIDS $17.22 MLN"
Matthew Graham  :  "RTRS - U.S. SELLS $29 BLN 7-YEAR NOTES AT HIGH YIELD 2.161 PCT, AWARDS 69.43 PCT OF BIDS AT HIGH"
Rich Cordova  :  "I've had some lenders that will not count the prepaids against the recoupment period and others that do. Makes a huge difference depending on the time of year and how much in prepaids need to be collected."
Ira Selwin  :  "typically fails the recoup of prepaids/cc within 36 months"
Brian McFarlane  :  "curious to know myself why an IRRRL is not meeting safe harbor."
Ira Selwin  :  "Tough Jesse - I haven't seen many people closing those at all. Supposedly TMS will purchase them ( i havent verified that), but the regs are fuzzy on the risk of closing it"
Jesse Harwick  :  "Has anyone closed a rebuttable presumption IRRRL?"