MBS CLOSE: Technical Trading Levels Persist
Trying to find meaningful topics of conversation on interest rates beyond the customary treatment of the technical trading range is a tall order. Although we hope it doesn't turn out to be the case, perhaps it will be so commonplace soon that we can forego the profuse apologies for ostensible repitition, but then the blog would cease to contain any words.
Does that pretty much cover you for today? More of the same... After we discussed the range in both tsy's and MBS in the afternoon post, the previously meaningful technical levels indeed held through the close and even went out a tick or two on the sunny side of the street. There goes MG again... What do you imagine he's trying to say?
I suppose for folks who either want the refresher or have not otherwise been exposed to the incessant reiteration, I'll go explain further. Simply put, prices in both MBS and Tsy's CONTINUE to make choppy and eratic moves both higher and lower only to find support or resistance at the same levels. And the "sunny" reference above is imply used to indicate we bounced a tick or two from resting exactly on the boundary of the price range and closed just slightly better. Unfortunately, that's about it.
The only trader color that ventured from reliance on the technical scapegoat made passing mention of potential concessionary positioning ahead of the week's tsy auctions. In other words, looming supply weighed on bond prices. As the short term bill auctions at 1pm seemingly coincide with price weakness in the bond market, it should be noted that these little guys are not drivers of current coupon MBS or the 10yr note on the screen before you. At best, the occurrence of one of the days only significant market events merely provided an excuse for the range trade to play a bit more pin-ball with our emotions.
Speaking of pinball, why use such a reference for price action? I'm sure you're already on top of that one, but just to add the visual to the universal law of September bond market physics that you undoubtedly already FEEL subconsciously:
Tsy auction coming up tomorrow, but not much else... Just a bit of slant to send you on your way, it feels like we're hearing more bond bearishness than bullishness coming from the big-kid table... Nothing extremely skewed, but just enough to either suggest heightened vigilance at the least or even a preemptive and gentle increase to lock predisposition. Even the sources of such whispers of pessimism note that which we're so fond of saying recently: the trend is your friend until it's not. In other words, safest bets are planning on the range until the range is broken.