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MBS Briefly Dip To Session Lows As Stocks Bounce Back
Posted to: Micro News
Wednesday, November 28, 2012 10:53 AM
Bond markets and especially equities markets continue to show an increasing tendency to whip around on any and all headlines pertaining to the Fiscal Cliff. In rapid succession this morning, we've had Erskin Bowles, John Boehner, and Orrin Hatch out with 'Cliffy' comments (negative, positive, positive, respectively).
The Bowles' comments flew somewhat under the radar as they made rounds at the same time that the New Home Sales data was released, but definitely added to the stock market's swoon. Shortly thereafter, Boehner spoke optimistically, and stocks rallied in spite of the absence of any new information. Treasuries and MBS began to give up some ground at that point and have recently been nudged into slightly weaker territory after additional comments from Utah's Hatch indicating a 'mere' $23 bln gap separating republicans and democrats over the Fiscal Cliff.
Fannie 3.0s are now benefiting from a sideways momentum that earlier had them underperforming Treasuries. As these headlines hit, MBS have been better able to hold sideways versus the more volatile response in Treasuries (most volatile in stocks! Over 10 points trough to peak on Cliff comments alone!).
Even so, MBS have been pushed to within a few ticks of their weakest levels of the morning, currently 105-08 (earlier low was 105-06). With the Fed's scheduled Twist buying set to conclude at 11am and Obama scheduled to speak at 11:35am, it makes sense to stay vigilant/guarded again the prospect of additional volatility in the next hour.
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