MBS RECAP: Deceptively Interesting Trading Range Ahead of Fed

Posted To: MBS Commentary

Deceptively Interesting Trading Range Ahead of Fed After a move up from 1.25 to nearly 1.30% on Monday, 10yr yields dropped back below 1.25% almost immediately on Tuesday. Those looking for reasons might find explanations ranging from Chinese stock market weakness to covid case counts to pre-Fed jitters. In general though, bonds have been sideways between 1.22 and 1.31 since last Wednesday. It's only when we move outside that range that something new and interesting will be happening in terms of bigger picture momentum. Wednesday afternoon's Fed announcement brings the next big chance at volatility. Econ Data / Events Fed MBS Buying 10am, 1130am, 1pm Durable Goods 0.8 vs 2.1 f'cast, 3.2 prev Market Movement Recap 08:55 AM moderately stronger overnight, mostly at EU open, but with…(read more)

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MBS RECAP: Deceptively Interesting Trading Range Ahead of Fed
MBS RECAP: Deceptively Interesting Trading Range Ahead of Fed

MBS Day Ahead: Overseas Markets Help Bonds Take Strong Stance

Posted To: MBS Commentary

After having gained so much over the past 4 months (not to mention the removal of the adverse market fee), and with a Fed announcement due out tomorrow afternoon, it wouldn't have been a surprise to see bonds take a more defensive stance overnight and this morning. Instead, 10yr yields are trying to fight through the 1.25% technical level (and they're largely winning) thanks to big weakness in Chinese equities and a strong bond market response in Europe. In the bigger picture, rising covid case counts continue to correlate quite well with the recent bond rally. The following chart shows a 7 day centered moving average of case counts (which is like a micro-seasonal adjustment for variations in reporting/testing between different days of the week). Today's key event in terms of volatility…(read more)

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MBS Day Ahead: Overseas Markets Help Bonds Take Strong Stance
MBS Day Ahead: Overseas Markets Help Bonds Take Strong Stance

MBS RECAP: Slow Monday, But Late Warning Shots (Re-Send w/ New Video)

Posted To: MBS Commentary

Slow Monday, But Late Warning Shots It was a slow trading day for the most part until the last 90 minutes. Until then, MBS and Treasuries were generally flat. As the day wound down, yields bumped up to the highs–right in line with the 1.295% technical level–and MBS coughed up a quick eighth of a point. That was enough for several lenders to reprice for the worse even though the weakness doesn't speak to any bigger picture issues. At worst, we could consider the late-day volatility to be a warning shot about bond trader defensiveness ahead of Wednesday's Fed announcement. Econ Data / Events Fed MBS Buying 10am, 1130am, 1pm New Home Sales -6.6% vs +3.0% f'cast, -7.8% prev Market Movement Recap 08:45 AM Stronger overnight. Yields fall in line with stock sell-off, bouncing in early…(read more)

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MBS RECAP: Slow Monday, But Late Warning Shots (Re-Send w/ New Video)
MBS RECAP: Slow Monday, But Late Warning Shots (Re-Send w/ New Video)

MBS RECAP: Slow Monday, But Late Warning Shots

Posted To: MBS Commentary

Slow Monday, But Late Warning Shots It was a slow trading day for the most part until the last 90 minutes. Until then, MBS and Treasuries were generally flat. As the day wound down, yields bumped up to the highs–right in line with the 1.295% technical level–and MBS coughed up a quick eighth of a point. That was enough for several lenders to reprice for the worse even though the weakness doesn't speak to any bigger picture issues. At worst, we could consider the late-day volatility to be a warning shot about bond trader defensiveness ahead of Wednesday's Fed announcement. Econ Data / Events Fed MBS Buying 10am, 1130am, 1pm New Home Sales -6.6% vs +3.0% f'cast, -7.8% prev Market Movement Recap 08:45 AM Stronger overnight. Yields fall in line with stock sell-off, bouncing in early…(read more)

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MBS RECAP: Slow Monday, But Late Warning Shots
MBS RECAP: Slow Monday, But Late Warning Shots

MBS Week Ahead: Bonds Weighing Fed Strategy Refinements And Delta Surge

Posted To: MBS Commentary

Heading into the weekend, the delta variant continued driving a surge in U.S. covid case counts with Friday's 118k+ being the highest day-over-day increase since February 5th. Officials expect the surge to continue into mid-August. After that, everyone would like to know how the return to school will change things in September. One of the key players in the "would like to know" camp is our own Federal Reserve, who is very much in the process of refining their policy outlook based on the case count situation and associated economic response. A new Fed policy announcement will be released Wednesday afternoon, and while it won't contain an official update, it could expose a potential shift in the Fed's line of thinking (or lack thereof). Will the Fed ramp up its stated level…(read more)

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MBS Week Ahead: Bonds Weighing Fed Strategy Refinements And Delta Surge
MBS Week Ahead: Bonds Weighing Fed Strategy Refinements And Delta Surge

MBS RECAP: Ending on an Equivocal Note Ahead of Fed Week

Posted To: MBS Commentary

Ending on an Equivocal Note Ahead of Fed Week If we look through the small-scale volatility throughout the week, we see bond yields moving back up to last week's lows as of Wednesday and essentially remaining flat since then. In that sense, Monday was the big panic day for markets, Tuesday was transitional, and the rest have been equivocal. Next week's Fed announcement introduces bigger volatility risks. Beyond the Fed, daily covid case counts (and any other significant covid-related news) will continue to be scrutinized as traders attempt to gauge the impact of the delta variant and flatter vaccination rates. Econ Data / Events Fed MBS Buying 10am, 1130am, 1pm Markit Composite PMI 59.7 vs 63.7 previously Services PMI 59.8 vs 64.8 f'cast, 64.6 prev Market Movement Recap 08:27 AM…(read more)

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MBS RECAP: Ending on an Equivocal Note Ahead of Fed Week
MBS RECAP: Ending on an Equivocal Note Ahead of Fed Week

MBS Day Ahead: Will Friday Finish What Wednesday Started?

Posted To: MBS Commentary

After a stellar Monday and a big reversal on Tuesday, Wednesday stands out as the week's big shift back toward last week's trading range. Today's session is in a position to finish the job. That would only require minimal weakness at this point. The alternative would be a sideways drift that sees bonds close right on the borderline. Either way, without any major data on tap and the Fed Announcement ahead next week, today is inherently limited in its ability to inform the bigger picture trend. MBS Pricing Snapshot Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live. MBS UMBS 2.0 101-22 : -0-01 Treasuries 10 YR 1.2830 : +0.0160 Pricing as of 7/23/21 10:26AMEST Tomorrow's Economic Calendar Time Event Period Forecast…(read more)

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MBS Day Ahead: Will Friday Finish What Wednesday Started?
MBS Day Ahead: Will Friday Finish What Wednesday Started?

MBS RECAP: Bonds Remain Resilient With Help From ECB

Posted To: MBS Commentary

Bonds Remain Resilient With Help From ECB This morning's ECB announcement proved to be moderately bond-friendly. Combined with weaker Jobless Claims data, it was enough to get bonds started off on a strong note. Gains continued throughout the European trading session. Yields bounced modestly after that but found solid support at 1.27% in terms of 10yr Treasuries–well under the "new frontier" pivot point for the week at 1.30% That said, we're more interested in a general range between 1.10% and 1.40% than the small scale day-to-day volatility that occurs inside that range. Next week's Fed announcement is the next scheduled event that has even a remote chance of informing our stay in such a range (or our departure). Even then, it's hard to be too preoccupied with the…(read more)

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MBS RECAP: Bonds Remain Resilient With Help From ECB
MBS RECAP: Bonds Remain Resilient With Help From ECB

Mortgage Rates In Best Territory Since February

Posted To: Mortgage Rate Watch

This week’s mortgage rates are hard to compare to last week’s. There are two simple reasons for this. The first is the recent removal of the adverse market fee that artificially increased rates for refinance transactions starting late last summer. The second is the general strength in the bond market compared to last week. Mortgage rates are, after all, based on trading levels in the bond market with higher prices (or lower yields) coinciding with lower rates. Bonds aren’t doing quite as well as they were doing on Monday, but because lenders didn’t rush to drop rates as much as the bond market allowed earlier in the week, they haven’t had to dial things back as much as bonds would suggest over the past 2 days. Now today, bonds are improving once again, albeit only slightly . Still, the fact…(read more)

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Mortgage Rates In Best Territory Since February
Mortgage Rates In Best Territory Since February

MBS Day Ahead: Fighting to Stay in New, Lower Rate Range

Posted To: MBS Commentary

This morning's ECB announcement proved to be moderately bond-friendly. Combined with weaker Jobless Claims data, it's been enough to keep bonds inside this week's new, lower yield range marked by a ceiling of roughly 1.30% (we have it marked at 1.295, or 1.29+ for short). We're close enough that it wouldn't take much of a negative impulse for that ceiling to be challenged, but more dramatic movement may be reserved for the next two weeks which will bring a Fed announcement and the hefty data cycle culminating in NFP Friday on August 6th. Perhaps the bigger question is whether or not yields just experienced a big-picture bounce by filling February's opening gap (a rare technical phenomenon where bonds start a new trading day noticeably farther away from the end of the…(read more)

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MBS Day Ahead: Fighting to Stay in New, Lower Rate Range
MBS Day Ahead: Fighting to Stay in New, Lower Rate Range