MBS MID-DAY: Pricing Worse

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10:32AM  : 
Bothersome Strength in Stocks. Bonds Against The Ropes
How bad can life really be with 3.5 coupons over 101 and 4.0 coupons over 104? 10yr notes are at 2.116 as well. All of the above speaks to extreme bullishness of bond markets in the mid to long term. But zooming in on this morning, they’re getting beat up a bit. We knew that the stock lever was likely to be in play today owing to the absence of scheduled data in addition to the fact that stocks and bonds have just generally been following each other quite a lot as they operate near these long-term technical levels. So resilient/rallying stocks are bad for bonds, and that’s what we have this morning. There was a distinct downwardly sloped line that stocks kept bumping into yesterday. This morning, that same line offers a clear supportive bounce–classic example of a “pivot point” or short term inflection (one man’s floor = another man’s ceiling). Since then SP’s have packed on a bit more than a point and are currently at 1153.17, testing a breakout of the 1150 level, which is a pertinent tech right now. A break of that will likely push 10yr yields higher (although 10’s have been surprisingly resilient in the mid 2.11’s in the last 10 minutes, so perhaps there’s hope that 10’s are “calling the stock market’s bluff” in a way). If 10’s do move higher, even though MBS have been doing a great job of tightening vs TSYs into this little sell-off, MBS might have to give up some ground as well. But to stay on that “tightening” topic for one more moment, remember yesterday how 10yr yields were up nearly a point at times when MBS were barely positive at all? Today, 10yrs are down 13 ticks currently whereas 3.5’s and 4.0’s are down only 11 ticks and 7 ticks respectively. Granted price vs. price isn’t always an accurate way to identify spread differences, you can at least see the improvement from yesterday.

8:16AM  : 
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Article source: http://www.mortgagenewsdaily.com/mortgage_rates/blog/225516.aspx

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