MBS OPEN: No Fixed Income Supportive Data Out this AM
Jobless Claims were better than expected(601,000). Stress tests are to be "reassuring" according to Timmy Geithner, and prepay speeds were not as fast as expected (6.0s and 6.5s slower...the rest of the stack faster but not by much). The 10 yr note yield is over that psychological 3.25% support level and looking to go higher...MBS having bad start to the session.
Since 5pm "Going Out" Marks....
FN30________________________________
FN 4.0 -------->>>> -0-07 to 100-02 from 100-09
FN 4.5 -------->>>> -0-06 to 101-27 from 102-01
FN 5.0 -------->>>> -0-04 to 102-26 from 102-30
FN 5.5 -------->>>> -0-04 to 103-15 from 103-19
FN 6.0 -------->>>> -0-01 to 104-20 from 104-21
GN30________________________________
GN 4.0 -------->>>> -0-07 to 100-05 from 100-12
GN 4.5 -------->>>> -0-04 to 102-03 from 102-07
GN 5.0 -------->>>> -0-02 to 103-16 from 103-18
GN 5.5 -------->>>> -0-02 to 103-27 from 103-29
GN 6.0 -------->>>> -0-01 to 104-15 from 104-16
UST10YR: 3.2466%
2s/10s: 224.98 bps
DOW FUTURES: +89 to 8560
EFFECTIVE FED FUNDS: -0.02 to 0.18 from 0.20
LIBOR FIXINGS
O/N LIBOR: -0.0075 to 0.2350 from 0.2425
1 MONTH: -0.0131 to 0.3819 from 0.3950
3 MONTH: -0.0175 to 0.9563 from 0.9737
6 MONTH: -0.0125 to 1.4937 from 1.5063
1 YEAR: -0.0125 to 1.8075 from 1.8200
Matt's recap of yesterday's MBS session...
Here is yesterday's action in MBS (top), stocks (bottom red), and 10 yr treasuries (bottom yellow):
Ok, so why the chart? Simply to illustrate YET ANOTHER day of "more of the same" for MBS, in that our price movements were remarkably stable compared to the other sector benchmarks. In plainer terms, the green line is much more stable and directional than the other lines. If this picture doesn't make clear that MBS operate in a more stable and unaffected "world of their own" (and all the other pictures like it from days past), I'm not sure what would. Blog post over, have a good one...
What? Too short? Why force the issue? It's the same boring thing OVER AND OVER again. Treasuries rally a lot, MBS move up a little, Treasuries mixed, MBS move up a little, Treasuries fall a lot, MBS move down a little. Yesterday was one of those "mixed days" for treasuries which allowed MBS to pick up a few ticks and tighten spreads. In a general sense, MBS are comparitively stronger and stronger versus treasuries, as they should be thanks to the Fed buying program. So all things being equal, the standard procedure has been for MBS to tighten up and outperform treasuries. The only exceptions are those more sizeable treasury rallies. It's understandable that MBS wouldn't gain quite as much during these, however, because they are usually driven by treasury specific data. So the sector to which the data pertains gets the most benefit.
Yesterday was somewhat of an exception as the 10 yr note was a mid-day beneficiary of a healthy auction of $22 bln of 10 yr notes. Yields dropped sharply after the auction, but leaked back higher through the close. Because of this course change by the end of the day, MBS, looked almost like a tortoise with some sort of track suit, just continued to plod methodically in its own direction, whereas the long-eared treasuries look like they sprinted out of the gate after the auction, but weren't able to keep the pace. In other words, the status quo did indeed hold on the initial treasury rally and spreads widened, aka, treasuries improved faster than MBS. But then, again in simple terms, treasuries reversed course whereas MBS (having not sprinted out of the gate so quickly and in general being less prone to fluctuations) were able to keep it up (the pace!) right through the close.