MBS OPEN: Lower Coupons Leading Off With Small Gains

By: Matthew Graham • Wed, Jul 8 2009, 8:30 AM

Last Session Recap

3yr auction sees decent demand offset by a higher than expected yield
reactions were mixed until stocks sold late day, pulling tsy yields down on the FTQ (flight to quality)
Stocks at worst and bonds at best levels since May
Stimulus 2.0?

The AM So Far...

Up a few ticks so far as "down in coupon" takes some practice swings before 10yr auction later today tells us how much everyone in the lower stack is worth...
10 yr auction later today (1pm) tells us how much everyone in the lower stack is worth
translation? The yield curve is the primary force driving MBS these days. Lower coupon (4.0 and 4.5) are more closely approximated by 10yr duration than by yesterday's 3yr.
Nada on the data-0-meter so far unless you care about store sales and redbook.

Charts