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Treasury yields moved slightly higher instant, offering Friday afternoon weakness in fairly linear fashion. The some weakness ended when European markets came online. German Bund yields opened many bps higher (They hadn had a chance to get familiar with Friday sell off), But began improving following that.
Treasuries started the household session a few bps higher. 10yr yields quickly hit 2.44 but are currently back down to 2.418, roughly around breaking even. MBS opened 1 tick lower and are now 3 ticks higher. Domestic bond markets have been cautiously advancing today as European bond markets have been holding ground or improving.
All that discussion we been having on the unwillingness of MBS to get involved in a geopolitical flight to safety is coming to an ugly head this morning. Fannie 3.5s are having problems to hold even the most modest gains while Treasuries rally to 14 month lows.
Here a play by play of the overnight rally and early morning correction:
Obama states air strikes in Iraq, 10yr dating chinese women assure fall to 2.38 in Asian trading
western trading opens and bonds rally more. u. k,spanish bunds hit high 1.02% broad variety. US 10 fall season to 2.349
Market rout fizzles as equities were unwilling to go more affordable, change was gentle at first.
Then news hit when 8am that Russia is ready to mediate talks between Kiev and East Ukraine. The reversal picked up steam and 10yr yields were look out onto 2.41
The letting go has since leveled off and yields are back to 2.39.
throughout it all, MBS are underperforming unbelievably with Fannie 3.5s up 5 ticks as opposed to 11 ticks of price gains in 10yr Treasuries. Economic data occurs, But largely insignificant today. Bond markets are fighting battles based on jockeying of trading positions and technical levels. after that, They in tune with European markets for one more few hours at least.
Bond stock markets were already doing fairly well, But got another jolt of positivity after newswires hit that a Ukrainian fighter jet was shot down over eastern Ukraine. The market reaction is due to such headlines standing the chance to be the start of a war/invasion a hot topic so far this week.
languages like german Bunds fell to 1.06 another new all time low and Treasuries and then breaking to levels not seen since late May. 10 are still trading just under 2.44.
MBS have been lagging Treasuries both in the medium and brief really, from the time that the geopolitical china girl photos risks stepped to the forefront in July. All that to say that MBS are NOT at their best levels since late May, And they must gain another half point to make that claim.
with that being said, They still up 6 ticks, Which is enough for positive reprice ability.
Yesterday high yields in Treasuries held as a supportive ceiling during part one of the overnight session. As american markets began trading, Bonds improved slightly with 10yr Treasuries falling back up in the 2.44 and German Bunds hitting new all time lows again (1.08%). That happened fairly early on in the european session and things were sideways in stronger territory from there.
as expected, currently the ECB (american Central Bank) Announcement contained stay away from surprises. Jobless Claims were more forceful than expected at 289k vs 305k. Treasuries and MBS weakened just slightly because, But encouraging comments for ECH Pres. Draghi been very helpful to bonds hold their ground. giving her a very comments included a reiteration of the ECB commitment to holding rates low and to working on their version of QE (may instead be an Asset Backed Security purchase program).
MBS and 10yr yields are currently holding just inside positive territory.
and moreover the European bond market strength overnight, S futures and other equities markets followed the move lower in bond yields during sleep. To a much more suitable degree than Treasuries, Equities markets get a big injection of assets when cash trading opens at 9:30am. Today open has seen a sharp move higher with S by then 8 points up from 9:30am volumes.
Treasuries and MBS have lost ground due to the fact. Fannie 3.5s are down 3 clicks from 9:30 and 10yr yields are up about a bp. This isn quite enough a weakness to warrant negative reprice risk yet. Even now, It looks like we have a way to bounce here. too soon to tell, But to this point, so excellent. We let you know if that changes.
some people, Part of the discussion in this morning ahead concerned the respective floors underneath yields in both German and US debt. Ironic because this overnight session, German yields once again broke using the red line on this chart:
And no sooner did that happen than 10yr yields moved below 2.47 all over again. There still some way to go before 10yr yields break the lows of the year, while 2.47 is an enormous pivot point. Being below definitely akin to a runner taking a lead off before stealing a base.
As for the eu bond market strength, Chalk that up to incredibly weak economic data out of Germany (aggressive Orders fell at fastest pace since Sept 2011) And Italy 3rd slide into economic climate since 2008. Germany and Italy are the largest and 3rd largest economies in the EU respectively. sensitive UK data (manufacturing output) Was icing on the cake for the eu bond rally.
10yr German Bunds fell to new all time lows instantly, on the at 1.10. Treasuries implemented, And were due to 2.44 courtesy of - 6:30am. MBS launched a quarter point higher (+0 08 worries 102 16). While European debt has continued to improve modestly, Treasuries and MBS have called it back a bit.
This reiterates the face that there's SIGNIFICANT resistance for Treasuries in this 2.44 2.47 community, But they will only let themselves get so far away from German yields before being forced to break lower. With Europe being such a big driver this morning, Keep an eye out for volatility heading into the EU bond market close at 1pm.
This isn an adverse reprice situation for the average lender, and surely a heads up that the trend in bond markets has been moderately weaker since just after 2pm. MBS have been under to some degree more pressure than Treasuries with Fannie 3.5s back down to 0 03 marriage ceremony at 102 08. They been - 102 13 earlier.
While the afternoon weakness doesn seen as connote negative reprice risk, It all but would ensure an absence of positive reprice potential (for those of you who might have been waiting).
Both of the 10am economic reports came in far more than expected, And bond markets have weakened this is why. Fannie 3.5s are at the lows through the day, Down 4 ticks at 102 06. 10yr Treasury promise are up 1.8bps available at 2.509.
Prices haven moved low enough to suggest disconfirming reprice risk yet, But that may the case if we lose a few more ticks. Here a run down of the knowledge.