MBS RECAP: Bonds Finally Make a Move. How Serious Is It?

After more than 2 months of a narrow sideways range and more than 3 weeks of an increasingly narrow trading range, bond yields finally broke out today.  Is this the start of a new trend toward higher rates or just an incidental byproduct of a few key events?  The answers are “probably not” and “probably” in that order, but the details matter.

Econ Data / Events

  • 20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th)

  • ADP Employment 749k vs 650k f’cast, 481k prev

  • Q2 GDP (final) -31.4 vs -31.7 prev

  • Chicago PMI 62.4 vs 52.0 f’cast, 51.2 prev

  • Pending Home Sales +8.8% vs +3.4 f’cast, 5.9 prev

Market Movement Recap

08:29 AM

Stock prices and bond yields moved slightly higher to start the overnight session, then fell after the presidential debate.  All of the above could also be summed up as sideways movement due to the low magnitude of the move.  Case in point, MBS are +0-00 right now and 10yr yields are only half a bp lower.  S&P futures are off a third of a percent.  

10:24 AM

Plenty of weakness starting at 9:30 (relative to the recent absence of volatility).  Reasons discussed in this alert (technicals, stimulus talk from Mnuchin, econ data, 9:30am NYSE open on a month-end trading day).  10yr yields up more than 3bps to .684 and 2.0 UMBS down nearly an eighth to 103-12 (103.125).  

02:34 PM

Prices fell further after the last update and then bounced just after the noon hour to leave us roughly where we were 3 hours ago. Weakness remains in Treasuries to the tune of 3bps in 10yr yields (.682% currently) and an eighth of a point in MBS (103.125).   McConnell headlines pushing back against stimulus prospects sparked the most recent gains for bonds.


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

103-12 : -0-03

Treasuries

10 YR

0.6857 : +0.0407

Pricing as of 9/30/20 4:34PMEST

Today’s Reprice Alerts and Updates

2:33PM  :  Stimulus Headline Helps Push Back Against Bond Weakness

12:16PM  :  ALERT ISSUED: Negative Reprices Becoming Likely

10:13AM  :  ALERT ISSUED: Negative Reprice Risk Increasing as Bond Losses Accelerate

8:39AM  :  No Reaction to Econ Data (or Anything Else)


MBS Live Chat Highlights

Paul Sinkevics  :  “market not repricing much on it”

Paul Sinkevics  :  “mbs market consensus is that it’s a marginal impact, ted. should result in slightly lower prepayments in the long term.”


Economic Calendar

Time Event Period Actual Forecast Prior
Wednesday, Sep 30
7:00 MBA Purchase Index w/e 320.9 327.0
7:00 Mortgage Refinance Index w/e 3346.9 3579.8
8:15 ADP National Employment (k)* Sep 749 650 428
8:30 GDP Final (%) Q2 -31.4 -31.7 -31.7
9:45 Chicago PMI * Sep 62.4 52.0 51.2
10:00 Pending Sales Index Aug 132.8 122.1
10:00 Pending Home Sales (%) Aug +8.8 3.4 5.9
Thursday, Oct 01
8:30 Core PCE Inflation (y/y) (%)* Aug 1.4 1.3
8:30 Jobless Claims (k) w/e 850 870
10:00 ISM Manufacturing PMI * Sep 56.3 56.0
10:00 Construction spending (%) Aug 0.8 0.1

By Matthew Graham , dated 2020-09-30 16:35:59

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Courtesy of Mortgage News Daily

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