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MBS At Highs Though Ranges Remain Narrow
Posted to: Micro News
Tuesday, March 12, 2013 1:46 PM
Treasuries have cut a linear path back to the doorstep of Friday's NFP sell-off. In the hours leading up to Friday's NFP, 10yr yields broke above 2.012 around 6:30am and with only one brief exception, never made it back below. 2.012 came into play again today as the lowest yield seen just before the noon hour.
This raised some back-of-mind concerns that it could again act as resistance and offer some motivation for afternoon weakness. Thus far, this hasn't been the case as 10's retraced only to 2.0260 and are slightly lower at the moment at 2.0226 . Equities markets are forming consolidative triangles right in line with Friday afternoon's highs, ostensibly for a break toward yesterday's lows or highs by today's close.
MBS continue to underperform day-over-day but have seen steady gains in a narrow range. Fannie 3.0s are up 8 ticks in today, cutting a 4 ticks range from 102-07 to 102-11. The current stability and moderate gains are entering territory that suggests a positive reprice or two, though we'd emphasize that this is less likely than the charts might make it seem (due to the narrow ranges). We also have a cautious eye on 10's unwillingness to break pre-NFP technical levels.
The stock lever hasn't been overly connected today, but the bounces at the lows of the day (in TSY yields and stock prices) did coincide. The eventual break out of this mid-day triangle in equities could be the next source of guidance for indecisive bond markets.
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