MBS Day Ahead: More on the calendar today, but this grave?

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2014 has been an interesting year for the bond markets.  In fact, with regard to its ability to do not continually confuse the expectations of the market, it has been one of the most interesting years of recovery.  It's not because there were no important and unexpected movement.  It is rather because that there was an absolute lack of big unexpected movements!

Although the markets have come to accept the fact that the rates may be lower this year, it's not the end of frustration.  Bonds have found a new way to confuse by loosening of economic data.  Now, on any given day, tradeflows, geopolitical risks or considerations overseas (EQ of the European Union for example) might outweigh the suggestions made by economic reports.

It is good to remain a little skeptical of any notion that geopolitical risk has the absolute authority on rates, but it has no impact.  This is especially true on days when the event calendar is relatively slow as the default expectation is for the world market to move in unison cowardly worms and far "risk."  The simplest expression of this is the stock lever where the prices of the stocks rising and bond yields align with tolerance of increased risk and vice versa.  The relationship is not always 1:1, but it is still easy to see.

To a certain extent, we continue to expect the markets to huddle together around the notion of risk for a little longer.  This is just a fancy way of saying that the 'stock leverage' must stay connected at least somewhat this week.  Two days presents a bit of a wildcard for outlook however.  Today, it is one of them.

The Joker has everything to do with the presence of economic data.  Today brings IPC and sales in the existing home page.  Recently, the markets are most concerned by inflation and housing.  It is not that these things were not interesting before, but there was more emphasis on both between the Fed and others.  This means that any major deviation of the expectations in the data today was a chance to cause a movement.  It remains to be seen if this movement is enough to break the monotonous range.

Priced below are delayed, note the timestamp at the bottom. Real time pricing is available via MBS's Live. 22/07/14 7:39AMEST analyze the MBS and mortgage pricing markets on our dashboard streaming

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MBS RECAP: Bond Markets Slightly Stronger Today, Capping Full Week of Gains

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Treasuries and MBS walked a cautious path to the exits today, staying perfectly inside the middle of yesterday's trading range.  The overnight session was less dramatic than recent examples and Treasury trading in Asia/Europe seemed less interested in Portuguese drama.

Interestingly enough, Treasuries actually performed better than German Bunds, hinting at some underlying/inherent strength in US bond markets.  MBS were feeling the same vibes and kept decent pace with the rally.

Prices improved steadily until just after the noon hour.  From there on out, everything went sideways after a brief correction.  Bonds seemed to take limited cues from equities markets, but volume and participation were so low that it doesn't make sense to read much into the movement.

Bottom line, looking at things from a 10yr Treasury perspective, yields are right near the zone that has seen the bigger bounces of 2014 (2.47-2.52).  The risk is that this becomes an extended resistance area that makes for a longer term bounce.  This could be ruled out with a break below 2.40, but until we're heading more convincingly in that direction or actually making that break, I'm feeling a bit more cautious heading into next week.

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live. Pricing as of 7/11/14 5:30PMEST Today's Reprice Alerts and Updates 2:51PM  :  ALERT ISSUED: Reprice Risk Increasing as Afternoon Leakage Shows Up 2:34PM  :  Gains Mostly Holding; Slight Pull-Back in MBS; Uneventful Trading Day so Far 9:18AM  :  Slightly Stronger After Uneventful Overnight Session Hugh W. Page  :  "Perhaps, but if we bounce again and yields retreat higher here we could easily be back over 2.60 or higher in pretty short order." Victor Burek  :  "thats why i feel longer term loans should risk floating" Hugh W. Page  :  "This is the second test of this level on the 10 yr in the last 2 weeks. I want to break through before I pull up the anchor on the float boat." Matthew Graham  :  "yesterday's low yields starting to form some messy potential resistance around 2.50. Longer we go without getting to 2.47, the more locky I'd feel." Victor Burek  :  "rates i have seen are a little worse than yesterday, so we are due for more reprices" Victor Burek  :  "let me add, would only lock short termers if lender reprices better" Kenneth Crute  :  "Vic saying lock, on a friday no less?? anyone see horseman riding across the sky?" Victor Burek  :  "if within 15 days...probably not a bad idea to lock today...longer term i am floating" Victor Burek  :  "no, short termers should consider it" Joseph Daquino  :  "VB probably disagrees :)" Joseph Daquino  :  "I think that today is presenting a great opportunity to lock. " Discuss the MBS and Mortgage Markets on Our Streaming Dashboard

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