On Again-Off Again Referendum Causing MBS Volatility


Of course there was the initial news this morning that Greece’s Prime Minister George Papandreou called for a referendum of the recently agreed-upon conditions of the Greek bailout which ushered bond markets to their best levels since 10/6.  We noted the drama HERE.  But said drama continued to unfold as newswires crossed later in the day, the first saying that there was too much opposition in the Greek parliment for the referendum to take place and the next saying that it was essentially “back on,” (although, we’re admittedly confused as to how all of that drama plays out, so we wouldn’t say this particular act of the play is over just yet). 

Those headlines, among several others, caused some volatility in bond markets late in the day, but in terms of 10yr yields, it essentially matched this morning’s range from roughly 2.05 to 1.95.  Whether we’re looking at 3pm marks or 5pm “going out” levels, the updated charts for this afternoon look almost identical to this morning’s, with the exception of stocks, which have ground a bit lower.  Here are updated versions of the same charts from this morning’s commentary:

FOMC announcement and Bernanke press conference coming up tomorrow, but after this morning, markets are at least as tuned in to any sort of headline from the EU (again) as they are to the FOMC and dare we say, perhaps even Friday’s NFP?  On a final note, we mentioned it as a risk this morning and saw it play out in fairly ugly fashion by the end of the day, but PIPELINE-CONTROL REPRICES FOR THE WORSE (PCRP’s anyone?) were a reality today–one that can continue if rates continue to flirt with the high 3’s.


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