MBS OPEN: Important Day Despite Lack Of Data

By: Matthew Graham •

AM SO FAR

  • After open weaker, MBS and tsy's are slightly improved AM
  • Should clarify for tsy's "improved" only vs. overnight and early AM session.  unchanged/mixed from DoD perspective.
  • 30yr bond improved to 4.07.  What shall we call this?  The "seller's remorse flattener?"
  • Dig the location of the bounce this AM in the 10yr.  Very important...
  • Only scheduled data = international trade.  For those who care, here are the vitals:
    • aug trade deficit $30.71 bln (consensus $33.00) vs july deficit $31.85 bln (prev $31.96 bln)
    •  exports +0.2 pct vs july +2.5 pct, imports -0.6 pct vs july +4.9 pct
    •  goods deficit $41.91 bln, services surplus $11.20 bln
    •  exports $128.22 bln vs july $128.00 bln, imports $158.93 bln vs july $159.85 bln
    •  capital goods imports $30.03 bln vs july imports $30.10 bln
    • china aug trade deficit $20.23 bln vs july deficit $20.42 bln
    • -opec aug trade deficit $6.37 bln vs july deficit $6.95 bln
    •  aug oil import price $64.75/bbl vs july $62.48/bbl, -46.0 pct from aug'08 $119.85/bbl
    •  aug total exports highest since dec 2008 ($132.92 bln)
  • Following the report, bonds are off their best levels just slightly, but this should not turn out to be the major mover of the day, IF there is a major mover at all..  But as this AM's title indicates, today is still important.  Rather than earning that designation from some abundance of scheduled data or volatility, there are more subtle reasons which we'll discuss throughout the day and which will tie in with yesterday's CLOSE.  Among those reasons is the fact that any day is important when the 10yr is this close to long term resistance.  3.27 marked the lowest closing yield for us in over 4 months and has served as support ever since we crossed it.  That's roughly where we bounced last night and that's roughly where we bounced this AM.

Recap of Previous Session

  • There is NO recap of the previous session here!
  • Rather, PLEASE read yesterday's close when you have time this AM.  It will be important to our discussions today and in the foreseeable future...

One thing to keep in mind as we get into treasury market related discussions...

MBS have been much more stable and been performing generally better than tsy's in recent days (especially into selling).

MBS, Tsy, and LIBOR Quotes

A Deeper Look: GSEs Lend a Hand to Mortgage Bankers