Thursday 7/3/08 ... An Evenly Matched Battle (or so they think)

By: Matthew Graham •
At A Glance:
  • MBS and UST's fight epic battle with stock futures
  • NFP almost dead on with expectations, bonds weren't happy, but now fighting back
  • Action's heavy, 6.0's unchanged DoD.  (2 ticks better from "going out" levels")
  • Jobless Claims High!  Over 400k!  Do stocks not care?!
  • QUICK LOCK GUIDE: FLOAT.  My guess is that stocks have shown their hand too early.  Look for bonds to turn around very shortly, especially after the stock market opens.  The current reaction (stock futures rising, MBS even) is not justified. 
  • VIGILANCE: HIGH
abbreviations guide (ongoing list): 
  • MBS -                 
    • Mortgage Backed Security
  • MDPC-
    • Mid Day Price Change (plus means for the better, minus for the worse)
  • DOW or DJIA -    
    • Dow Jones Industrial Average
  • Ticks-                   
    • 1/32nds of bond pricing.  8 ticks=8/32nds=.25 in cost (YSP or discount)
  • DoD, YoY, MoM-  
    • Day over day, year over year, month over month, etc..
  • O/N-                   
    • Overnight
  • Coupon-               
    • The "interest rate' of the MBS
  • 6.0's, 5.5's           
    • always means FNMA 30yr Fixed MBS with a coupon of that number.  6.0's = 6.0% coupon rate MBS
  • PCE-                    
    • Personal Consumption Expenditures
  • UST-                    
    • United States Treasury Bonds.  5UST = 5 year, 10UST = 10 year, etc.. 
  • NAPM (PMI)         
    • National association of purchasing management (Purchasing Manager's Index)
  • ISM (MFG)           
    • Institute for Supply Management (mfg: manufacturing)
  • Wide/Gap/Gappy  
    • refers to the wideness or gap between treasury yields and MBS yields.
  • "Going Out"          
    • 4:45PM EST.  Official Close is 3pm EST 
  • FI                        
    • "fixed income."  For our purposes, will simply refer to treasuries and MBS 
  • NFP                    
    • Non-Farm Payrolls.  Key part of employment report.  Most meaningful gauge of labor market
  • ADP                    
    • ADP private payrolls, some feel a precursor to NFP, but historically quasi-accurate at best.