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Gains Mostly Holding; Slight Pull-Back in MBS; Uneventful Trading Day so Far
Posted to: Micro News
Friday, July 11, 2014 2:34 PM
At the risk of "calling it" before "it" is technically over, the trading day was essentially over at 11am. Participation fell off and we've spent a roughly equal time on either side of the 11am prices/yields.
There continues to be no salient connection between events in the market place and movements in MBS/Treasuries. If we were forced to pick one, we might note the LOOSE correlations with equities.
With that in mind, stocks have been improving since just after 12:30pm and bond markets have come off their best levels. But until/unless we see a bit more weakness here in bonds, the "over at 11am" thing looks like the case.
To be fair and cautious, there's always a chance that prices will leak lower into the afternoon. Lighter participation means it takes less initiative (read: less $) to move prices. If that's going to happen, it will probably be apparent soon.
MBS, specifically are already pushing it a bit with prices down 3 ticks from the highs (102-15 vs 102-18). That said, we've seen very few positive reprices, and none of them priced in the full move up to 102-18. That would suggest no reprice risk at the moment. We'd need to see 2-3 ticks of further weakness before that changed materially.
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