No Easy Victories as Bonds Revisit Weaker Levels


Last week’s bounce at a ceiling of 2.60% (twice, essentially) was enough for some DEFENSIVE hope.  In other words, it introduced the possibility of the recent selling trend running out of steam near these levels.  But as I cautioned at the time, there were connotations for a strong OFFENSE bringing rates in the other direction.  For that, we would have at least needed to break below 2.52% and preferably 2.42% in the bigger picture.  With yesterday’s bounce at 2.52%, today ended up looking like a natural progression back toward higher levels.  

There were ample headlines relating to the government shutdown and stop-gap funding bill today.  At times, markets appeared to react to these, but those reactions are hard to separate from other trading considerations in play.  The ‘other consideration’ include esoteric, boring stuff like curve-related tradeflows, corporate deal hedging, and plain old technicals (i.e. that bounce off 2.52%, and the subsequent trading decisions based purely on math applied to trading levels themselves, as opposed to fundamental data and news).

Bonds began the day weaker, but rallied into the 11am hour–almost back to unchanged levels.  European bond trading had been a positive input, so this explains some of the weakness heading into the afternoon (Europe closed for the day around the time the sell-off began).  But we also had some debt ceiling headlines, a swath of corporate bond issuance, and a break above the 2.57% technical level in 10yr yields.  The selling ultimately didn’t do any catastrophic damage, but with MBS underperforming, it did leave mortgage rates in the worst shape in roughly 9 months.  The caveat is that today’s quotes are only microscopically weaker than last Wednesday’s on average.

MBS Pricing Snapshot

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


FNMA 3.5

101-23 : -0-08


10 YR

2.5849 : +0.0409

Pricing as of 1/17/18 4:42PMEST

Today’s Reprice Alerts and Updates

2:38PM  :  ALERT ISSUED: Bonds at Weakest Levels; Negative Reprice Risk Increasing

9:19AM  :  ALERT ISSUED: Overnight Weakness Continues Into Domestic Hours

MBS Live Chat Highlights

Ted Rood  :  “stocks up “only” 1% so far all day.”

Matthew Graham  :  “potentially adding to (or flat-out instigating) most recent weakness”


Nathan Miller  :  “yep appraiser has to confirm no damage – typically $150 or so”

Dan Shapiro  :  “that was certainly a rude awakening this morning… is that all it takes is a reinspection to get it cleared… first time dealing with this”

Nathan Miller  :  “yep, sprinkle a lock extension to top it off”

Hugh W. Page  :  “And you need a reinspection on the property? We are very familiar with this in Florida :)”

Dan Shapiro  :  “Is anyone else having their fundings halted because Los Angeles County, San Diego, Ventura… all are declared FEMA disaster areas?”

Victor Burek  :  “agreed”

John Tassios  :  “that won’t help much VB, to do 2 week extensions. Need to resolve this and do a longer term agreement.”

Victor Burek  :  “”Enough Is Enough” Lindsey Graham Will Not Vote For Stopgap Bill”

Dmitriy S  :  “For a FNMA purchase (investment prop) what is the maximum investor concentration allowed in an established condo project?”

Original Source