Data-Driven Weakness
MBS Recap Matthew Graham | 4:32 PM
It was a reasonably straightforward day for the bond market. Trading was flat overnight, then weaker after the 8:30am Jobless Claims data. That report is hit and miss as a market mover, but a sub-200k print without any recent seasonal spike is certainly worth a few bps of weakness. Impacts were most notable in Fed Funds Rate expectations, which have now fully eliminated any possibility for a January cut and lowered the probability of a March cut from over 40% last week to under 20% today. In the bigger picture, longer-term rates remain squarely range-bound and MBS remain broken out the top of their comparable range thanks to GSE purchases.
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- Continued Claims (Jan)/03
- 1,884K vs 1890K f'cast, 1914K prev
- Jobless Claims (Jan)/10
- 198K vs 215K f'cast, 208K prev
- NY Fed Manufacturing (Jan)
- 7.70 vs 1 f'cast, -3.90 prev
- Philly Fed Business Index (Jan)
- 12.6 vs -2 f'cast, -10.2 prev
08:31 AM
First move is weaker after lower jobless claims. MBS down an eighth and 10yr up 2.5bps at 4.157
10:50 AM
Lows of the day after rebounding into the 9:30am hour. MBS down 6 ticks (.19) and 10yr up 2.6bps at 4.159
01:48 PM
MBS down 6 ticks (.19) and 10yr up 2.1bps at 4.153
03:15 PM
Weakest levels for Treasuries with 10yr up 3.2bps at 4.164. MBS still down 6 ticks (.19).
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There were two ways to approach lock/float decisions yesterday afternoon (lenders who didn't reprice for the better had a bit of a cushion today, and it showed. Lenders who repriced were susceptible to today's weakness). Contrast that to this afternoon where there's been little-to-no reprice activity and Friday's risk/reward profile is more balanced. Certainly, GSE MBS purchases offer some built-in insulation for risk-tolerant clients. But broader bond market bearishness and our nearness to multi-year lows in conventional rates present compelling lock opportunities for the risk-averse crowd.
- Ceiling/Support (can be used as "lock triggers")
- 4.48
- 4.40
- 4.34
- 4.28
- 4.19
- 4.12
- 4.05
- Floor/Resistance
| MBS |
| 30YR UMBS 5.0 |
100.16 |
-0.24 |
| 30YR UMBS 5.5 |
101.39 |
-0.13 |
| 30YR GNMA 5.0 |
99.98 |
-0.17 |
| 15YR UMBS-15 5.0 |
101.36 |
-0.17 |
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| US Treasuries |
| 10 YR |
4.171% |
+0.039% |
| 2 YR |
3.566% |
+0.056% |
| 30 YR |
4.795% |
+0.013% |
| 5 YR |
3.769% |
+0.061% |
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