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If today's relative lack of economic data and inspiration toward directional movements set the stage for low volume and low volatility, tomorrow is perhaps no better. Apart from ongoing auto sales reports, the calendar is more weighted toward headlines than scheduled data with the lone pending home sales report left to battle fed-speak from both Volker and Geithner at 10am. Apart from that, there's not much that promises to inspire the markets to wild movements ahead of that which always reserves the right to be more wild: Friday NFP.
Today, 4.5's ended down a mere tick to 100-31 whereas the 10yr note was off 17 ticks pushing the yield up to 3.66. Perhaps if I overtly call attention to the cliche of "more buyers than sellers" it lessens the glibness of it all as indeed the ongoing environment of limited production pitted against a Fed that refuses to stop buying has spreads refusing to widen. Indeed any time you see what you saw today, where MBS are nearly unchanged while treasuries sell off half a point, you're almost guaranteed to be witnessing spread tightening. But even looking solely at treasuries, today's sell off is not so much a decided negative as opposed to a correction within the range.
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To whatever extent those late January high yields remain unchallenged by this week's trading and similarly to whatever extent that trading neither approaches recent low yields just under 3.6 is the extent to which we remain in a fairly tight range and are CONFIRMING Jan 20th's move below 3.67. From there, it will simply be up to MBS to show some nominal, restricted movement against the benchmark, leaving that picture fairly unchanged in the clearly established range between 101-04 and 100-20.
In this low volatility environment, devoid of inspiration, with exceedingly high potential volatility in the future, considering locking and floating this week is shaping up very much like fishing in a boat drifting toward a waterfall. Catch the fish that are easy to catch without reaching to far for the difficult ones and be prepared to get the boat back to shore in plenty of time to avoid the waterfall unless you have plans of going over it. In other words, more cliches are in order as we look to buy low/sell high, riding rips and buying dips, floating the floatable indefinitely, but locking the lockable when rates seem decent or better, and certainly if we seem to be facing an impending reprice in the middle of the day.
But as always, mid-day reprices are the easiest things to see coming and for many, the question will be whether or not to float into NFP. Not only does that not make any sense to decide today, but we may not even have changed our tune much on Thursday night (unless the market moves out of this range). Then again, I suppose the fact that the last paragraph amounts to a suggestion to "lock when you see decent rates" this week, that should count for something. Whatever the case, very rarely does NFP NOT move markets. Don't let anything we say convince you of better than 50/50 odds of the market going in one direction or another after the report. But we do know that if you took an app in January, that locking now would probably have turned out to be more profitable than locking then.
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MBS CLOSE: Another Day Of Limited Data Ahead Of NFP
If today's relative lack of economic data and inspiration toward directional movements set the stage for low volume and low volatility, tomorrow is perhaps no better. Apart from ongoing auto sales reports, the calendar is more weighted toward headlines than scheduled data with the lone pending home sales report left to battle fed-speak from both Volker and Geithner at 10am. Apart from that, there's not much that promises to inspire the markets to wild movements ahead of that which always reserves the right to be more wild: Friday NFP.
Today, 4.5's ended down a mere tick to 100-31 whereas the 10yr note was off 17 ticks pushing the yield up to 3.66. Perhaps if I overtly call attention to the cliche of "more buyers than sellers" it lessens the glibness of it all as indeed the ongoing environment of limited production pitted against a Fed that refuses to stop buying has spreads refusing to widen. Indeed any time you see what you saw today, where MBS are nearly unchanged while treasuries sell off half a point, you're almost guaranteed to be witnessing spread tightening. But even looking solely at treasuries, today's sell off is not so much a decided negative as opposed to a correction within the range.
To whatever extent those late January high yields remain unchallenged by this week's trading and similarly to whatever extent that trading neither approaches recent low yields just under 3.6 is the extent to which we remain in a fairly tight range and are CONFIRMING Jan 20th's move below 3.67. From there, it will simply be up to MBS to show some nominal, restricted movement against the benchmark, leaving that picture fairly unchanged in the clearly established range between 101-04 and 100-20.
In this low volatility environment, devoid of inspiration, with exceedingly high potential volatility in the future, considering locking and floating this week is shaping up very much like fishing in a boat drifting toward a waterfall. Catch the fish that are easy to catch without reaching to far for the difficult ones and be prepared to get the boat back to shore in plenty of time to avoid the waterfall unless you have plans of going over it. In other words, more cliches are in order as we look to buy low/sell high, riding rips and buying dips, floating the floatable indefinitely, but locking the lockable when rates seem decent or better, and certainly if we seem to be facing an impending reprice in the middle of the day.
But as always, mid-day reprices are the easiest things to see coming and for many, the question will be whether or not to float into NFP. Not only does that not make any sense to decide today, but we may not even have changed our tune much on Thursday night (unless the market moves out of this range). Then again, I suppose the fact that the last paragraph amounts to a suggestion to "lock when you see decent rates" this week, that should count for something. Whatever the case, very rarely does NFP NOT move markets. Don't let anything we say convince you of better than 50/50 odds of the market going in one direction or another after the report. But we do know that if you took an app in January, that locking now would probably have turned out to be more profitable than locking then.
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