Status Quo Restored in Rates Market. Lack of Conviction Caps Volume

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The lack of conviction discussed in the AM post is obvious in both stocks and bonds today.

The S&P is +1.47% at 1204.12. Essentially erasing the losses seen on Friday, but not heading any higher.

The June settlement 10 year TSY note futures contract has settled in where Friday's rally really took hold volume-wise. Only 500,000 10yr contracts have traded today. That is WAY below average.  

Rate sheet influential MBS coupon are trading in a painfully slow manner with under $2bn changing hands today. I would say the majority of that buying has happened near the price lows of the day.

 The FN 4.5 is -0-09 at 100-18  yielding 4.439%. The secondary market current coupon is 4.419%. Yield spreads haven't moved much today...we have basically played follow the leader with TSYs and the swap curve. This illustrates the lack of activity in the mortgage market.

A move in either direction would require concrete news and broad based participation from markets that have the day off (Tokyo  and London).  Mortgages will continue to play follow the leader until there is a reason to buy and sell bonds.  If 10s hold steady near current levels...I bet the FN 4.5 closes between 100-17 and 100-19.

This news just hit my inbox:

Korea, Canada, the United States, the United Kingdom and France as past, current and future chairs of the G20 Finance Ministers and Leaders summits issued the following statement:

"We welcome the strong economic program Greece is putting in place with the financial assistance of the Member States of the Euro-Zone and the IMF. This program merits the support of the international community. In addition to the financial assistance being provided by Euro-Zone members, we pledge support for the IMF's exceptional financing for Greece on an expeditious basis. Determined and consistent implementation of the program by Greece, combined with this exceptional assistance from the Member States of the Euro-Zone and IMF, will help restore financial stability in Greece and promote market confidence."
 
YOON, Jeung-Hyun, Minister of Strategy and Finance, Republic of Korea
James M. FLAHERTY, Minister of Finance, Canada
Alistair M. DARLING, Chancellor of the Exchequer, United Kingdom
Timothy F. GEITHNER, Secretary of the Treasury, United States of America
Christine LAGARDE, Minister of Economy, Industry & Employment, France

Plain and Simple: this puts us one step closer to seeing the market remove more of the "flight to safety" bid in Treasuries. I still think the next directional move for "rate sheet influential" interest rates is UP.