Even though the range has held up so well in recent weeks, one can't help but let the "what if" thoughts creep in when we see the half point sell off 2 hours into a Friday.  But once again, when the cards are shown, the range takes the pot, and we have to wonder for another day if AQ, who said "We didnt panic then are not panicking now. The range is still the range. Play the Range Until the Range Plays You." and "The market is range trading short term positions, not trending on BIG PICTURE outlooks," is Cool-Hand-Luke reincarnated.

Well played Cool-Hand...  But AQ and I BOTH hope, as we said yesterday, that this is becoming more of an EXPECTATION and less of a SURPRISE to you.  And we're flat out telling you WHEN THE RANGE BREAKS OR EVEN LOOKS LIKE IT'S BEGINNING TO BREAK, you will either know it because it happens so brutally, or more likely because we will be talking about it in every post.

Wanna see a longer term chart with more edification of the range and some of it's internal stops? 

Non-speed readers will be pleased to hear that the state of prices and yields at the moment obviates a decent chunk of writing and analysis.  Two reasons...

  1. If we are indeed "playing the range until the range plays us," and considering 10yr yields are near their highest levels, and those yields remain above 3.45 intraday, the only feasible course of action would be to float below 3.48 and only consider locking upon breaking into 3.45.  This of course assumes no event-driven spread wideners in MBS.   
  2. With number 1 in mind, there's not much to say that can't be said with a couple parallel lines overlaid on a few charts...  Ever played pong? 

Well, I'm sure it's not within the capacity of our minds, fingers, and egos to leave you completely analysis-free, but the same concepts repackaged 25 times a week might get old...  The important question I have is this: What do you want to discuss concerning all this range-trade business?  How clear is it for you?  What makes you say "oh yeah!  Totally!" and what leaves you scratching your head.  Don't be shy...  Even if you don't have a User ID yet, or haven't commented on this site, JUMP ON AND DO IT!!!  This is an excellent "calm before the storm" in which to interact as a community.

MBS, Tsy, and LIBOR Quotes

The FN 4.0 is currently -0-05 at 98-01 yielding 4.203% while the FN 4.5 is trading 6/32 lower at 100-20 yielding 4.426%. The secondary market current coupon is 4.381%. The FN 4.5 yield is 95.7bps over the 10yr TSY yield, wider than this morning.