Bonds Tank; Yields Surge Past 2014 Highs


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July 8, 2011.  That’s how far you’d have to go back to see higher 10yr yields than we saw today.  At their worst, they were at 3.0945%.  At the close, it doesn’t look like they’ll be much better (currently trading in the 3.07+ range).  Up until today, the high had been 3.04%, both 3 weeks ago and on Jan 2, 2014.  

When rates spike to the same high level that many years apart, it only reinforces the technical significance of that level.  Thus, any break above 3.04% was likely to result in a significant amount of follow-through, and that’s really what today was all about.  It only took moderate weakness overnight to get bonds within striking distance.  From there, an as-expected Retail Sales report did the rest of the trick.

But why did we get hurt so bad if Retail Sales was merely “as-expected?”

Again, it’s not about Retail Sales.  It’s about momentum.  Retail Sales merely served as one potential point of salvation for rates.  If it had come in much weaker than expected, today’s breakout may have been delayed for a few days, but that breakout would likely have happened nonetheless.

Quite a few lenders managed to let the selling run its course before putting out rate sheets.  That made for some ugly rates this morning, but with fewer negative reprices than we typically see on days this big.  The downside is that there’s a bit of weakness left to price in to those rate sheets if bonds happen to hold steady overnight.  

MBS Pricing Snapshot

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.


FNMA 4.0

101-04 : -0-12


10 YR

3.0742 : +0.0792

Pricing as of 5/15/18 5:05PMEST

Today’s Reprice Alerts and Updates

2:20PM  :  ALERT ISSUED: Panic-Selling Engaged; Negative Reprices Nearly Certain

12:55PM  :  ALERT ISSUED: Negative Reprice Risk Increasing

9:55AM  :  ALERT ISSUED: Negative Reprice Risk For a Few Lenders

8:45AM  :  ALERT ISSUED: Yields Hit 6-Year Highs After Retail Sales

MBS Live Chat Highlights

Matthew Graham  :  “That would be like predicting the future. All I’m saying is that I’d wager 3.25% would bring in a significant wave of value buyers AND short covering (booking profits on previous long-term bets on rising rates)”

Christopher Stevens  :  “MG- I am jumping in late today and just read your Day Ahead. History going back to 2011 shows that there is no technical indicator to stop selling between here and 3.20 but that doesn’t mean a new technical level could be formed. Or are you saying real selling pressure (or the concern of more selling pressure) won’t stop until we test the 3.20 mark?”

scott weinstein  :  “hand up”

scott weinstein  :  “I have stockholm syndrome”

Brent Borcherding  :  “That’s if you want lower rates. I’m curious, do we all have stockholm syndrome, as captives of the low growth 8 year period that we simply can’t believe the economy might finally be taking off? I’m not Mr. Sunshine by any stretch, but shouldn’t we all be rooting for a sustainable higher rate environment?”

Matthew Graham  :  “3.25”

Ted Rood  :  “(mouth vomiting)”

Brent Borcherding  :  “3.25”

Ted Rood  :  “Now that 3.0% has been decisively breach, what yields should we hope to stay under, MG?”

Ted Rood  :  “Shout out to MG for being CNBC source for article at top of Newstream”

Dominick Cordone  :  “locked pipelines are like a cold beer on a hot summer day”

Original Source