MBS RECAP: Breaking Down The Crazy Relationship of MBS, Mortgage Rates, and Treasuries

Bonds showed up to sell today–at least Treasuries did.  MBS, not so much!  That was the focus of the morning commentary and today’s recap video offers additional clarification and detail for those seeking a deeper understanding. In terms of actually recapping today’s market action, fiscal headlines were in focus after tradeflow-based weakness at the start of the day.  0.96% technical support generally held firm for Treasuries, but buyers were not eager to push back in the other direction.

Market Movement Recap

08:19 AM

Bonds were roughly unchanged overnight, with a token rally during Asian hours followed by volatility and weakness in Europe.  Yields were near their overnight highs before the ADP data and dropped just slightly afterward.  The 10yr is down 0.6 bps at .923 and 1.5 UMBS are up 3 ticks (0.09).

10:59 AM

Powell and Mnuchin are talking to congress again, but Treasuries had already sold-off a bit after 930am NYSE open.  This further suggests the “new month” repositioning we discussed yesterday (i.e. traders’ hands were tied for month-end positions on Monday, but the new month is bringing new momentum and “rotation” out of bonds and into stocks).

01:14 PM

Definitely some supportive vibes kicking in for Treasuries, but buyers aren’t jumping in very aggressively, to say the least.  Let’s call it: “less badness” as opposed to anything new and good just yet.  Yield highs of .959% remain intact since just after 10am this morning.  Multiple bounces near those highs.  Nice flat trajectory as well.  MBS hangin’ tough near unchanged levels.  No reactions to any of the Fed speakers or stimulus headlines, unless we consider the unwillingness to embark on a bigger rally to be a reaction.

02:58 PM

Weakest levels, briefly, following upbeat stimulus headlines.  Bonds are now back in line with today’s prevailing range after additional clarification on the stimulus headlines (i.e. not as much of a done deal as trading algorithms may have hoped).

MBS Pricing Snapshot

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


UMBS 2.0

103-22 : +0-03


10 YR

0.9390 : +0.0050

Pricing as of 12/2/20 4:04PMEST

Today’s Reprice Alerts and Updates

3:04PM  :  Reprice Risk Fading as Bonds Bounce Back

2:23PM  :  ALERT ISSUED: Negative Reprice Risk Increasing

10:58AM  :  Treasuries Struggling; MBS Trying to Look Away

8:19AM  :  Weaker ADP Does No Harm; Bonds Roughly Unchanged

Economic Calendar

Time Event Period Actual Forecast Prior
Wednesday, Dec 02
8:15 ADP National Employment (k)* Nov 307 410 365
Thursday, Dec 03
8:30 Jobless Claims (k) w/e 775 778
10:00 ISM N-Mfg Bus Act * Nov 60.9 61.2
10:00 ISM N-Mfg PMI * Nov 56.0 56.6

By Matthew Graham , dated 2020-12-02 16:06:37

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Courtesy of Mortgage News Daily

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