Mostly an Aftershock For Yesterday’s Bond Rout


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If you happened to be out of the office yesterday, 10yr yields finally broke out of their most recent consolidation pattern and moved quickly to the highest levels in just under 7 years.  Big spikes can sometimes be isolated.  That means today could have seen a decent move back in the other direction.  For a few fleeting moments this morning, that possibility remained on the table, but by mid-morning, it was gone.

Bonds taunted optimists one more time with a bounce right at yesterday’s high yields.  In other words, it looked like we had a chance to form a 2-day double top at 3.0945%.  But the afternoon hours crushed that little dream with a linear move up to 3.1038% by the close.

Specific motivations were in short supply.  One of the only cogent arguments in the bond trading community was that Fed comments played a role.  Specifically, new Fed member Raphael Bostic was on the record as saying it was “his job” to make sure the yield curve doesn’t invert.  That’s a pretty clear indication that the Fed needs longer term rates to go higher (because Bostic also plans on 6 rate hikes between 2018 and 2019). 

Indeed, some of the pressure on yields followed those comments, but the start of the NYSE session could also explain the move.  Either way, it was an uncommonly stark assessment from a Fed voter, and one that’s worth keeping in mind as we see how their policy path unfolds.

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

100-30 : -0-07


10 YR

3.1038 : +0.0238

Pricing as of 5/16/18 6:38PMEST

Today’s Reprice Alerts and Updates

11:01AM  :  ALERT ISSUED: Negative Reprice Risk Increasing

10:13AM  :  ALERT ISSUED: Bonds Back Into Negative Territory

MBS Live Chat Highlights

Brent Borcherding  :  “The market can remain irrational longer than you can remain solvent.”

Tom Schwab  :  “free advertising on MBS Live?”

Alan Craft  :  “There is none”

Spencer Packer  :  “If PF and Flagstar reprice when they see their shadows, what’s the reasoning behind Ethos’s reprices?”

Tom Schwab  :  “Whereas others reprice when they see their shadow – like Provident and Flagstar”

Tom Schwab  :  “I don’t think that there is necessarily a correlation. I think it has more to do with Secondary judgment and systems. Some lenders need to do a lot of work to issue a price change so they tend to be slow. … US Bank comes to mind.”

Wendy Smith  :  “Are all these reprices early pricing lenders? I don’t think those who posted rates at 10am EST need to reprice…yet”

Original Source