MBS RECAP: All Cyprus Ahead Of FOMC Tomorrow

The day thus far has been a prodigious parade of Cyprus-related headlines with the most recent few falling on mostly deaf ears as domestic markets reach the burnout stages of their attention span. The whole universe of “risk” bottomed out in unison around 1:30pm as stock prices, Euros, Bund yields, and US Treasuries all hit their session lows and slowly began marching in the other direction.

For MBS, this also marked the highs in terms of price with Fannie 3.0s touching 103-07. Since then, we’ve gotten one more headline:

RTRS- – ECB SAYS TAKES NOTE OF CYPRUS PARLIAMENT VOTE, REAFFIRMS COMMITMENT TO PROVIDE LIQUIDITY AS NEEDED WITHIN RULES

This understandably spooked bond markets, but the reaction was surprisingly brief. 10’s Spiked quickly from 1.91 to 1.92 and are now back down to 1.905. Equities spiked. The Euro spiked BIG. Now both of those are at least halfway back down to previous levels.

MBS dipped from 103-04 to 103-02 and are back to 103-04. It’s too soon to tell if the ECB headline is going to have some sort of lasting effect that solidifies the reversal, but at the very least, that’s a possibility. That said, the predominant momentum looks to be more sideways (as opposed to higher in rate or lower in MBS Prices) for now, possibly even turning back toward bullishness. We’ll let you know if that changes.

Article source: http://www.mortgagenewsdaily.com/mortgage_rates/blog/300687.aspx

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