Unofficial Supportive Week Down, Official Version To Follow
MBS CLOSE AT A GLANCE
- thus ends an unofficial supportive week in which MBS shot up the better part of a full point since Monday's close.
- 100-11 was the bottom of the range for 2 days of trading beginning monday afternoon and ending wednesday afternoon. (more on that price level below)
- 10yr yields flirted with 3.5 several times and now go out at 3.32. Bully Bully!! (oh and by the way, you probably don't need to know anything about prepayment speeds for that to let you know MBS spreads got the shaft)
- S&P down about 20 points on the week. Cue McD soundtrack: Da da da da da.... I'm lovin' it...
- Yield curve flattened like so many protesters at a steamroller convention. Compared to recent 240-260's, ending the day at a ridiculous 233. Think of this like the bond market issuing a challenge to the reigning champion... Bonds V Stocks in cagematch next week.
- official supportive week on the horizon, though hard to get more supportive than this week.
- not to mention that in the paradoxical world of MBS, gravity becomes more intense the farther we are from earth. Considering we just broke and held 4 month highs for two days in a row, don't get over-confident. Our discussions on supportive week derive from conversations with traders. And what's supportive to them (spreads) isn't necessarily supportive to the primary market (outright MBS prices).
- MBS spreads SHOULD benefit on so-called week, meaning that it's up to ECON data and palatibility of auction announcement on Thursday to keep the yield curve basis in line
- Nonetheless, if spreads tighten AND the yield curve holds steady to improved, we're meltin' faces... At least relative to the oh so recent parnertia.
- Speaking of parnertia, um, YEAH, IT IS RELEVANT TO MENTION IT HERE CONSIDERING WE TOUCHED PAR AT ONE POINT THIS WEEK... (well, ok 100-01, but cut me some slack here!)
Q: Hey MG, what gives with that relatively stable floor Monday through Wednesday at about 100-10 to 100-11 on the MBS chart?
A: Well, I'm glad you asked!
It's hard to believe we haven't been paying more attention to ancient MBS past and it's correlation to the present day. Truth be told, I've been neglecting to mention the roots of this technical gem to you ( even though we've been discussing 100-12 a lot recently )because I didn't want you to spend too much time trying to figure out how one man (ok AQ says I have to say "two men") could consistently identify such pertitent technical levels. In other words, woe be upon him who must confront our undiluted glory, or whatever... Seriously though, this is cool... Luckily for your rapidly expiring patience for Friday PM MG humor, I think the following chart says plenty about some of the epic long term implications of the price level somewhere between 100-10 and 100-12 that we now seem to be validating as a new range floor.
Pretty cool eh? Even if for nothing else than a conversation piece, but I can't help allowing this to contribute at least partially to the case for validating this price level as recent support.
OK, it's Friday, so let's hurry up and get you out the door...
- Seems like both AQ and I are saying the same kind of "stuff" about hedging, locking, 4 month highs, etc...
- Not only that, but this was one of the rare afternoons where we neither conferred verbally or read each other's content.
- Something to those thoughts then? Probably....
- Does it mean you should rush to lock everything tonight or Monday? certainly not.
- It's all about your own personal hedge ratio and gutflop... We're merely reminding you to sprinkle in more hedge than the bullishness and technical breakout might suggest.
- Yom Kippur on Monday. Expected to hamper flows in conjunction with the data-free day.
- NFP week, prepayment speeds, more auction announcements, GDP, and other solid tier 2 data crammed (mostly) into the 3 day belly of next week.
- Monday might kick off slow or choppy, but after that, get ready for fun, excitement, and more MG satire than you knew you wanted!
- Oh and by the way, we Friday FINALLY mattered!