Considering 10yr auctions and FOMC Minutes typically happen on Wednesdays, it's not uncommon for them to be sharing the stage. In today's case, they were the only relevant items on the schedule. While they certainly caused a bit of near term volatility, not only did that volatility play out on a micro scale, but it also carried trading levels back toward 'unchanged' by the end of the day.
In their defense, both of these key players did as little as possible to be interesting. The 10yr auction was right down the middle in terms of the awarded yield, bid-to-cover, and foreign participation. The Fed Minutes similarly offered no surprises with some members still favoring an earlier rate hike and others still favoring late 2015 or even 2016.
Markets were consequently left to draw their own conclusions about the lack of evolution in Fed thinking. As we discussed this morning, the dialogue for these Minutes occurred in a world where the most recent Jobs report didn't happen.
True, the Fed isn't known for letting one employment report materially change their stance, but if they're saying they're just looking for a bit more improvement in employment, and if we know the next employment report that informs their big picture assessment is an incredibly negative one, we can at the very least conclude that they will NOT have seen that improvement yet. That feels like it should be a net-positive for bonds, and trading levels seemed to agree this afternoon.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom.
Real time pricing is available via MBS Live.
| MBS | FNMA 3.0 102-15 : +0-02 | FNMA 3.5 105-06 : +0-01 | FNMA 4.0 106-29 : +0-00 |
| Treasuries | 2 YR 0.5360 : +0.0160 | 10 YR 1.9060 : +0.0200 | 30 YR 2.5300 : +0.0100 |
| Pricing as of 4/8/15 5:22PMEST |
Today's Reprice Alerts and Updates
2:20PM : Bonds Bounce Back; Post-FOMC Knee Jerk
2:09PM : ALERT ISSUED: Bonds Weaker After FOMC. Negative Reprice Risk Remains
11:41AM : ALERT ISSUED: Negative Reprices Increasingly Possible
11:14AM : ALERT ISSUED: On the Edge for Potential Reprice Risk
9:37AM : Back Into Negative Territory After Tepid Overnight Gains
MBS Live Chat Highlights
Dan Clifton : "these are not the minutes you are looking for"
Brian Bockholdt : "That works for me.. I am happy with move along, nothing to see here!"
Matthew Graham : "yes. I'm not seeing anything interesting here"
Brian Bockholdt : "I feel like we could close green on this "
Brian Bockholdt : "MG wouldnt you consider this a non event? Didn't we already know "several" thought a hike in June was likely.. Also considering this all came prior to NFP"
Brian Bockholdt : "several thought June.. Prior to NFP.. We already knew that didn't we?"
Brian Bockholdt : "You think that's sounds hawkish?"
Matthew Graham : "looking for further improvement in labor markets... the improvement that was subsequently called into question with the last NFP"
Hugh W. Page : "Sounds like some uncertainty among Fed participants"
Oliver Orlicki : "seems hawkish"
Matthew Graham : "RTRS- FED MINUTES SAY FURTHER IMPROVEMENT IN LABOR MARKET, STABILIZATION OF DOLLAR AND OIL PRICES WOULD HELP ESTABLISH THAT INFLATION WILL TURN HIGHER"
Matthew Graham : "RTRS- SEVERAL PARTICIPANTS EXPECT FAIRLY GRADUAL PACE OF RATE INCREASES; NOT NECESSARILY AT EVERY MEETING - MINUTES"
Matthew Graham : "RTRS- FED MINUTES SAY A COUPLE OF PARTICIPANTS SUGGESTED HOLDING OFF RAISING RATES UNTIL 2016"
Matthew Graham : "RTRS - OTHER PARTICIPANTS ANTICIPATE INITIAL RATE HIKE MORE LIKELY LATER IN 2015 DUE TO IMPACT OF U.S. DOLLAR AND OIL PRICES ON INFLATION - MINUTES"
Matthew Graham : "RTRS- SEVERAL PARTICIPANTS AT FEDERAL RESERVE'S MARCH POLICY MEETING JUDGED THAT ECONOMIC DATA LIKELY TO WARRANT JUNE INTEREST RATE HIKE - FED MINUTES"
Matthew Graham : "right down the middle"
Matthew Graham : "RTRS- U.S. 9-YR 10-MO NOTES BID-TO-COVER RATIO 2.62, NON-COMP BIDS $12.18 MLN"
Matthew Graham : "RTRS- U.S. SELLS $21 BLN 9-YR 10-MO NOTES AT HIGH YIELD 1.925 PCT, AWARDS 74.56 PCT OF BIDS AT HIGH"
Matthew Graham : "Long story short, anything under 1.928 is good. Anything over 2.65 bid-to-cover is good. and anything over 50% indirect bid is decent, over 60% is great."
Matthew Graham :
"In other news, 10yr Auction coming up. This is a reopening vs a refunding. That means a "miss" wouldn't be quite as big of a deal (reopenings tend to miss more often). The last 2 auctions beat the 1pm yield expectation, but the previous 9 missed. The current expectation is 1.928 based on when-issued trading. Indirect bidders have taken about 50% on average, but closer to 60% in the last 2 auctions as EU QE began. If this terminology is confusing, here's the primer: http://mndne.ws/1gIJmzh"