MBS LUNCH (updated): 7yr Auction Results
The Treasury Department has successfully auctioned $29 billion 7 year notes at a high yield of 3.005%. 30.22% of the bids were accepted at the high yield. The bid to cover ratio, a measure of demand, was 2.79%. Primary Dealers took $9.27bn. Indirect Bidders took $17.87bn.
Following the auction, the 10yr yield is 2bps higher at 3.38%...
MBS trading flows are sporadic at best. The FN 4.5 is +0-06 at 100-27 yielding 4.358% and "rate sheet influential" yield spreads are a modestly tighter. The trend channel is however no longer intact as the FN 4.5 has FAILED to break 101-00...
Yield Curve
2s/5s: 2bps steeper at 144bps
2s/10s: 2bps flatter at 244bps
5s/10s: 4bps flatter at 101bps
5s/30s: 2bps flater at 180bps
10s/30s: 1bps steeper at 79bps
The S&P is holding near the lows of the day at 1048, which is the 38% retracement of the recent bullish trend cycle (SEE LAST POST FOR CHART).
Meanwhile the dollar is testing intraday the 76.818 intraday high, currently at 76.768. The rallying dollar has brought about weakness in commodities. Oil is -$3.00 at $65.97. NYMEX CRUDE has not been this cheap since mid-August. Gold is holding near $996 after reaching an intraday high of $1018.50 this morning.
Lenders passed along a few extra bps in rate sheets this morning. Unless the FN 4.5 breaks 101-00 (which would require 3.36 to be broken in 10yr), we dont expect to see many reprices for the better today.