Rates Recover as Stock Lever Spurs Bargain Buying. Reprices Due
Stop the presses! After touching 4.5 month highs following the release of Chicago PMI data at 9:45, profit taking has led stocks back into the red. S&Ps are currently -8.25 at 1132.75. This is a 20 point turn around. Chop chop....
As liquidity dried up and the floor fell from underneath stocks, the rates market caught a bid.
TSYs and MBS turned for the better at the session price lows/spread wides. While trading activity isn't exactly robust, real money was reportedly buying on the lows, lock desks were rebooting hedges, and fast money showed some interest at the yield spread wides. But overall, flows are not heavy in MBS space and benchmark TSYs are aiding our cause.
The 10yr note is -0-09 at 100-25+ yielding 2.533% (+3.2bps on the day). 2s/10s are still 3bps steeper at 209 wide. 10s are consolidating around 2.52%, if this level is not broken we may see a retest of 2.58%.
The November FNCL 4.0 is currently bid -0-02 at 102-12. Check out where FNCL 4.0s ran into resistance....RIGHT AT OUR INTERNAL TREND LINE!!!
Loan pricing is about 25bps worse at the five majors with rates below 4.375% taking an absolute beating (worse by 25 to 55bps).
Reprices for the better are due but if I was running the desk I would be apprehensive about taking down new indications and rebuilding rate sheets until the market calms down (until 10s finish consolidating) and a more stable intraday range is found. If we hold at these levels....reprices for the better should be on the way.