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You are viewing Micro News from Monday, Jan 6, 2014 - View all recent Micro News
  • 1/6/14
    Off Highs But Assessing Support; Further Weakness Connotes Some Reprice Risk

    MBS are off their earlier highs of 103-11 (Fannie 4.0) by 5/32nds to 103-06 currently.  This level has held up well so far and coincides with a slightly better example of support at 2.965 in 10yr Treasury yields.

    If we're able to hold or improve upon current levels, negative reprice risk would be limited or altogether absent.  Being 5 ticks from the highs is fairly borderline in terms of reprice risk, but those previous highs were only in effect for a moment or two with the modal (most frequently recurring) highs being 103-09.  In that context, 103-06 isn't that much of a risk.

    Category: MBS, UPDATE
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  • 1/6/14
    MBS Hit New 2-Week Highs; Favorable Treasury Technicals

    10yr yields just broke below what would be considered the lower of two potential "necklines" in their short term "head and shoulders"  (H&S) formation. 

    Treasury Head and Shoulders

    As with any technical pattern, the H&S can't predict the future and technical analysts that believe in their relevance tend to see them more frequently than others.  All that to say: take any such technical break with a few grains of salt.

    The implication isn't much different from that of any other potential inflection point in that once 2.952 is broken, we now watch it as a potentially supportive ceiling.  The more it offers support (and indeed it has over the course of 5 minutes), the more relevant it becomes as a short-term inflection point.  In that sense, the H&S would have helped identify the inflection point (a trading level more likely to prompt bounces vs breaks).

    MBS have kept reasonable pace with the Treasury rally with Fannie 4.0s up 9 ticks (9/32nds) on the day now at 103-09.  One positive reprice has been reported so far and other lenders may be considering it, but nothing widespread unless we gain a few more ticks.  That said, 103-09 is the best price level since 12/23.

    Category: MBS, UPDATE
    Share:   
  • 1/6/14
    ECON: ISM Services Weaker Than Expected; Bond Markets Improve
    • Non Manufacturing PMI at 53.0 in December vs 54.5 forecast, 53.9 in November
    • New Orders 49.4 vs 56.4 Nov, first contraction since July 2009
    • Employment rose to 55.8 from 52.5

    Bond markets have reacted favorably to the data so far with 10yr yields moving to new 2-week lows at 2.963.  Fannie 4.0s have added 2 ticks from the morning update and are close to Thursday's highs of 103-07.  A large negative revision to Durable Goods in this morning's Factory Orders data isn't hurting the cause either.  The revision lower was expected, but perhaps not as big as the one seen (from 3.5 to 1.8)

    From ISM:

    The NMI® registered 53 percent in December, 0.9 percentage point lower than November's reading of 53.9 percent. This indicates continued growth at a slightly slower rate in the non-manufacturing sector.

    The Non-Manufacturing Business Activity Index decreased to 55.2 percent, which is 0.3 percentage point lower than the 55.5 percent reported in November, reflecting growth for the 53rd consecutive month, but at a slightly slower rate.

    The New Orders Index contracted after 52 consecutive months of growth for the first time since July 2009, when it registered 48 percent. The index decreased significantly by 7 percentage points to 49.4 percent, and the Employment Index increased 3.3 percentage points to 55.8 percent, indicating growth in employment for the 17th consecutive month and at a faster rate.

    The Prices Index increased 2.9 percentage points to 55.1 percent, indicating prices increased at a faster rate in December when compared to November. According to the NMI®, eight non-manufacturing industries reported growth in December. Despite the substantial decrease in the New Orders Index, respondents' comments predominately reflect that business conditions are stable.

    Category: MBS, UPDATE
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  • 1/6/14
    Bond Markets Stronger Overnight; Some Resistance at Thursday's Best Levels

    Both MBS and Treasuries have shied away from breaking through Thursday's best levels this morning--2.969 for 10yr yields and 103-07 for Fannie 4.0 MBS. 

    In Treasuries' case, yields perfectly matched the resistance level while MBS only made it up to 103-05.  That said, they're still up 4/32nds on the day at 103-04.

    As expected, participation is returning to markets after the holiday/weather combo made for a lighter than normal post-New-Year trade.  So far, that hasn't affected ranges, but it increasingly looks like that can and will change this week.

    In other words, using Treasuries as an example, we've had a compact, sideways range since the 26th.  Leaving out the last few hours of the 31st, it's been 3.021 to 2.968, and this week's data and events are very likely to result in a break of that range. 

    The first contender in that regard is coming up a 10am with ISM Non-Manufacturing, seen rising to 54.8 from 53.9 previously.

    Category: MBS, UPDATE
    Share:   
 
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  • 1/6/14

    MBS are off their earlier highs of 103-11 (Fannie 4.0) by 5/32nds to 103-06 currently.  This level has held up well so far and coincides with a slightly better example of support at 2.965 in 10yr Treasury yields.

    If we're able to hold or improve upon current levels, negative reprice risk would be limited or altogether absent.  Being 5 ticks from the highs is fairly borderline in terms of reprice risk, but those previous highs were only in effect for a moment or two with the modal (most frequently recurring) highs being 103-09.  In that context, 103-06 isn't that much of a risk.

    Category: MBS, UPDATE
    Share:   
  • 1/6/14

    10yr yields just broke below what would be considered the lower of two potential "necklines" in their short term "head and shoulders"  (H&S) formation. 

    Treasury Head and Shoulders

    As with any technical pattern, the H&S can't predict the future and technical analysts that believe in their relevance tend to see them more frequently than others.  All that to say: take any such technical break with a few grains of salt.

    The implication isn't much different from that of any other potential inflection point in that once 2.952 is broken, we now watch it as a potentially supportive ceiling.  The more it offers support (and indeed it has over the course of 5 minutes), the more relevant it becomes as a short-term inflection point.  In that sense, the H&S would have helped identify the inflection point (a trading level more likely to prompt bounces vs breaks).

    MBS have kept reasonable pace with the Treasury rally with Fannie 4.0s up 9 ticks (9/32nds) on the day now at 103-09.  One positive reprice has been reported so far and other lenders may be considering it, but nothing widespread unless we gain a few more ticks.  That said, 103-09 is the best price level since 12/23.

    Category: MBS, UPDATE
    Share:   
  • 1/6/14
    • Non Manufacturing PMI at 53.0 in December vs 54.5 forecast, 53.9 in November
    • New Orders 49.4 vs 56.4 Nov, first contraction since July 2009
    • Employment rose to 55.8 from 52.5

    Bond markets have reacted favorably to the data so far with 10yr yields moving to new 2-week lows at 2.963.  Fannie 4.0s have added 2 ticks from the morning update and are close to Thursday's highs of 103-07.  A large negative revision to Durable Goods in this morning's Factory Orders data isn't hurting the cause either.  The revision lower was expected, but perhaps not as big as the one seen (from 3.5 to 1.8)

    From ISM:

    The NMI® registered 53 percent in December, 0.9 percentage point lower than November's reading of 53.9 percent. This indicates continued growth at a slightly slower rate in the non-manufacturing sector.

    The Non-Manufacturing Business Activity Index decreased to 55.2 percent, which is 0.3 percentage point lower than the 55.5 percent reported in November, reflecting growth for the 53rd consecutive month, but at a slightly slower rate.

    The New Orders Index contracted after 52 consecutive months of growth for the first time since July 2009, when it registered 48 percent. The index decreased significantly by 7 percentage points to 49.4 percent, and the Employment Index increased 3.3 percentage points to 55.8 percent, indicating growth in employment for the 17th consecutive month and at a faster rate.

    The Prices Index increased 2.9 percentage points to 55.1 percent, indicating prices increased at a faster rate in December when compared to November. According to the NMI®, eight non-manufacturing industries reported growth in December. Despite the substantial decrease in the New Orders Index, respondents' comments predominately reflect that business conditions are stable.

    Category: MBS, UPDATE
    Share:   
  • 1/6/14

    Both MBS and Treasuries have shied away from breaking through Thursday's best levels this morning--2.969 for 10yr yields and 103-07 for Fannie 4.0 MBS. 

    In Treasuries' case, yields perfectly matched the resistance level while MBS only made it up to 103-05.  That said, they're still up 4/32nds on the day at 103-04.

    As expected, participation is returning to markets after the holiday/weather combo made for a lighter than normal post-New-Year trade.  So far, that hasn't affected ranges, but it increasingly looks like that can and will change this week.

    In other words, using Treasuries as an example, we've had a compact, sideways range since the 26th.  Leaving out the last few hours of the 31st, it's been 3.021 to 2.968, and this week's data and events are very likely to result in a break of that range. 

    The first contender in that regard is coming up a 10am with ISM Non-Manufacturing, seen rising to 54.8 from 53.9 previously.

    Category: MBS, UPDATE
    Share:   
 
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