Bond yields and stock prices bottomed at the same time in the overnight session as markets responded to the news item of the day.  In this case, it is best characterized as “buzz” surrounding a new strain of covid in the UK.  The rest of the day saw a bounce back in the other direction as investors traded with their minds instead of their hearts (main reason: vaccines don’t care about the new strain).  MBS underperformed–modestly at first, then significantly in the afternoon.  

Market Movement Recap

08:56 AM

Bonds improved and stocks slid overnight on news of a new covid strain (not really “new,” but the buzz kept growing).  The flight-to-safety phase is over for now with 10yr yields down 3.5bps at .91 and UMBS up 3 ticks (0.09).

09:23 AM

EU Medicines Agency: no evidence that vaccine won’t work against new covid variant.  Bonds selling a bit more.  10yr down only 2bps now and UMBS up only 2 ticks (0.06).

02:26 PM

Treasuries turned negative just now and MBS-specific weakness continues.  1.5 UMBS are down more than a quarter point from the highs and negative reprices are starting to roll in.

04:09 PM

Treasuries back in the green with most of the bounce happening after the 3pm CME close.  Stocks and bond yields peaked at the same time just as they hit their weakest levels at the same time in the overnight session (speaks to “risk-on/off” trading).  MBS continue to underperform, but are off their weakest levels.


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

103-15 : -0-04

Treasuries

10 YR

0.9350 : -0.0130

Pricing as of 12/21/20 4:21PMEST

Today’s Reprice Alerts and Updates

2:00PM  :  ALERT ISSUED: Negative Reprice Risk Increasing

9:36AM  :  ALERT ISSUED: MBS Turn Red; Earliest Lenders Could Consider Reprices

8:56AM  :  Bonds Stronger to Start; New Covid Strain Rattling Markets


Economic Calendar

Time Event Period Actual Forecast Prior
Tuesday, Dec 22
8:30 GDP Final (%) Q3 33.1 33.1
10:00 Existing home sales (ml)* Nov 6.70 6.85
10:00 Exist. home sales % chg (%)* Nov -1.0 4.3
10:00 Consumer confidence * Dec 97.0 96.1
13:00 5-Yr Note Auction (bl)* 15

By Matthew Graham , dated 2020-12-21 16:23:51

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Courtesy of Mortgage News Daily

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