MBS suffered, somewhat, from supply/demand issues immediately following the Fed’s 11:30-11:50am buying operation today. Prices rebounded by the close and were never catastrophically lower in the first place. With the exception of a surprise stimulus headline or a huge departure from expectations in Retail Sales tomorrow morning, focus now shifts squarely to tomorrow’s Fed announcement. What’s at stake? The Fed may or may not adjust the weighted-average maturity (WAM) of its bond buying portfolio. If they do, it would likely give Treasuries a friendly boost. Vice versa if they don’t. MBS would see a smaller version of the Treasury move in either case.
Econ Data / Events
-
20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th)
-
NY Fed Manufacturing 4.9 vs 6.9 f’cast, 6.3 prev
-
Import Prices 0.1 v 0.3 f’cast, -0.1 prev
Market Movement Recap
08:21 AM
Bonds were modestly stronger to start the overnight session and then weakened slightly during European hours. There wasn’t enough movement in either direction to justify a search for market movers. Same story post-econ data just now. 10yr yield is up half a bp at .903 and UMBS 1.5s are down 2 ticks (0.06) at 100-28 (100.875).
12:20 PM
Modest amount of MBS-specific weakness + modest amount of illiquidity = a moderate but fairly abrupt drop in MBS prices. Treasuries haven’t experienced similar weakness because there’s no broad market mover in play. Rather, MBS weakness is almost certainly a result of the Fed’s most recent buying operation (which ended right when the weakness began, and which likely favored MBS 1.5 coupons over 2.0s).
03:36 PM
Losses accelerated heading into the 2pm hour as Treasuries joined in the bond-selling spree. 10yr yields were as high as .925 and 1.5 UMBS were as much as a quarter of a point lower on the day. They’ve since recovered an eighth of a point.
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 2.0 103-18 : -0-03 |
||
| Treasuries |
10 YR 0.9110 : +0.0200 |
||
| Pricing as of 12/15/20 4:57PMEST | |||
Today’s Reprice Alerts and Updates
2:02PM : ALERT ISSUED: Negative Reprice Risk Increasing
12:17PM : ALERT ISSUED: Negative Reprice Risk Increasing
9:04AM : Bonds Modestly Weaker Following Vaccine Headlines
| Economic Calendar | ||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
By Matthew Graham , dated 2020-12-15 16:59:01
Source link
Courtesy of Mortgage News Daily