Rates Holding FTQ Bid as Stocks Hit Session Highs. Loan Pricing Comparison

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After better than expected New Home Sales data flashed, the risk trade extended its recent positive progress and benchmark interest rates are higher...

S&P futures just printed a new one month high, currently +8.50 at 1109. Volume rose when S&P futures fell to 1098 support but participation has tapered off into the rally. Open interest does not reflect an increase in new long positions as much as it does forced buying in the form of short covering. Nonetheless S&Ps are holding positive progress above 1100 while the pain trade continues to play out for short sellers.  The S&P 500 index (cash not futures) needs to break the 200 day moving average at 1113...

Yields are higher across the curve with the biggest losses seen in the front-end where TSY auction supply is focused this week (supply concessions).   The 2yr note yield is up 2.0bps, 3s are +2.4bps , 5s are +2.1bps, 7s are +2.0bps, the long bond is +1.9bps. The 3.50% coupon bearing 10 year Treasury note is -0-05 at 104-03 yielding 3.016%, +1.8bps on the day. Look for 10s to retest the 3.00% level...

Rate sheet influential mortgage-backed securities are off session highs (and tights) but still reflect robust investor demand for agency MBS coupon clippings.  The Sept. FNCL 4.0 is +0-01 at 101-12. The FNCL 4.5 is +0-02 at 103-20. The secondary market current coupon is 0.4bps lower at 3.764%. CC yield spreads are tighter on the day.

If you missed the post I wrote on Friday discussing just how healthy investor demand is for agency MBS: HERE IT IS

Below is a loan pricing comparison. While there is less margin baked into rate sheets today, the major lenders are basically offering the same pricing they offered on Friday.  On average, rebate is 1.4bps lower. Unless production MBS coupon price levels fall further, reprices for the worse are unlikely at the majors.

The last time S&Ps moved over 1,100, the 10 year note touched 3.12%, but that was right before the Treasury auctioned debt supply in the long end of the curve. Today trading volumes are low in the rates market and the "flight to safety" appears to be holding steady.  Stocks may find it difficult to gain momentum unless more money flows out of  U.S. TSYs and other risk averse spread products like uber rich agency MBS.