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You are viewing Micro News from Tuesday, Dec 10, 2013 - View all recent Micro News
  • 12/10/13
    Bond Markets Near Best Levels After 3yr Auction, though Probably Not Because of it
    10yr yields drifted toward the 3yr auction with a slight downward trajectory. Nothing changed about that momentum or the volume with which it was trading (fairly light) until well after the results were out. Treasury futures volume and prices spiked around 1:14-1:15pm, suggesting the move was unrelated to the auction.

    Whatever the case, it brings Treasuries back to their best levels of the day near 2.80 and MBS fairly close, with Fannie 4.0s up 10 ticks at 103-28.
    Category: MBS, UPDATE
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  • 12/10/13
    Bond Market Snowball Ran Out of Steam; Early Hint of Negative Reprice Risk
    Fannie 4.0s have fallen to levels just on the edge of negative reprice risk for some lenders. This heavily depends on the time of day that an initial rate sheet came out. Fannie 4.0s are up 4 ticks on the day, but down 4-5 ticks from the morning's highs and 3-4 ticks from the first wave of lender rate sheets.

    If we leveled-off here for the day, we'd probably avoid reprices, but the risk that we won't is reinforced by 10yr yields prodding at their highest levels of the day. Just as momentum carried us in one direction earlier today, it can take on a life of its own if it begins heading too far in the other direction. 10's are currently still 4 bps lower on the day, but up from 2.80 to 2.817 in the past hour.

    A potential budget deal in the Senate may contribute to selling pressure if more developed headlines come across.
    Category: MBS, UPDATE
    Share:   
  • 12/10/13
    Short Covering Snowball Rally Pushes Treasury/MBS Prices Much Higher
    We've been talking about 'short-covering' quite a bit over the past few days and it continues to be a factor in the positive and paradoxical NFP counter-attack (i.e. bond market rallying despite stronger NFP on Friday).

    We've also been discussing the limited trading motivations inherent at the start of this week, leaving traders to observe and react to other trade flows and technical levels. We're in a situation now where both the tradeflows and short-covering are feeding on each other.

    On one side, trades based algorithmically ("algo trading") on technical levels are subsequently triggering short positions to cover (i.e. forcing them in to buy bonds, thus covering their short). As those shorts become buyers, prices advance further, creating new technical levels for algo traders to buy.

    Long story short, it's like a 2nd grade soccer game. Everyone is following the ball and the ball is moving toward one side of the field. The ref will probably blow the whistle before 10yr yields break past 2.75 and we're already seeing resistance at 2.80, but that's still made for a solid 5.5bp drop so far today.

    MBS, for their part, don't get to participate quite as much because there's no inherent algo trade, and less liquidity than Treasury futures (which is where the Treasury algo trading takes place) overall. Fannie 4.0s are still up 10 ticks on the day at 103-27.
    Category: MBS, UPDATE
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  • 12/10/13
    10yr yields drifted toward the 3yr auction with a slight downward trajectory. Nothing changed about that momentum or the volume with which it was trading (fairly light) until well after the results were out. Treasury futures volume and prices spiked around 1:14-1:15pm, suggesting the move was unrelated to the auction.

    Whatever the case, it brings Treasuries back to their best levels of the day near 2.80 and MBS fairly close, with Fannie 4.0s up 10 ticks at 103-28.
    Category: MBS, UPDATE
    Share:   
  • 12/10/13
    Fannie 4.0s have fallen to levels just on the edge of negative reprice risk for some lenders. This heavily depends on the time of day that an initial rate sheet came out. Fannie 4.0s are up 4 ticks on the day, but down 4-5 ticks from the morning's highs and 3-4 ticks from the first wave of lender rate sheets.

    If we leveled-off here for the day, we'd probably avoid reprices, but the risk that we won't is reinforced by 10yr yields prodding at their highest levels of the day. Just as momentum carried us in one direction earlier today, it can take on a life of its own if it begins heading too far in the other direction. 10's are currently still 4 bps lower on the day, but up from 2.80 to 2.817 in the past hour.

    A potential budget deal in the Senate may contribute to selling pressure if more developed headlines come across.
    Category: MBS, UPDATE
    Share:   
  • 12/10/13
    We've been talking about 'short-covering' quite a bit over the past few days and it continues to be a factor in the positive and paradoxical NFP counter-attack (i.e. bond market rallying despite stronger NFP on Friday).

    We've also been discussing the limited trading motivations inherent at the start of this week, leaving traders to observe and react to other trade flows and technical levels. We're in a situation now where both the tradeflows and short-covering are feeding on each other.

    On one side, trades based algorithmically ("algo trading") on technical levels are subsequently triggering short positions to cover (i.e. forcing them in to buy bonds, thus covering their short). As those shorts become buyers, prices advance further, creating new technical levels for algo traders to buy.

    Long story short, it's like a 2nd grade soccer game. Everyone is following the ball and the ball is moving toward one side of the field. The ref will probably blow the whistle before 10yr yields break past 2.75 and we're already seeing resistance at 2.80, but that's still made for a solid 5.5bp drop so far today.

    MBS, for their part, don't get to participate quite as much because there's no inherent algo trade, and less liquidity than Treasury futures (which is where the Treasury algo trading takes place) overall. Fannie 4.0s are still up 10 ticks on the day at 103-27.
    Category: MBS, UPDATE
    Share:   
 
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