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You are viewing Micro News from Wednesday, Apr 9, 2014 - View all recent Micro News
  • 4/9/14
    Bond Markets Improve Following FOMC Minutes

    As expected, there is generally no new information in the FOMC Minutes beyond what has already been gleaned from the Announcement and speeches.  Given that the day of the announcement marked a sell-off for bond markets, it stood to reason that any attempt to balance the perceptions from that day would be positive for bond markets, and that's what we're seeing in the Minutes.

    Of particular note are the following snippets:

    "Most participants also believed that, as part of the process of
    clarifying the Committee's future policy intentions, it would be
    appropriate at this time for the Committee to provide additional
    guidance in its postmeeting statement regarding the likely behavior of
    the federal funds rate after its first increase."  (clarity is good for markets)

    " A number of participants noted the overall upward shift since December
    in participants' projections of the federal funds rate included in the
    March SEP, with some expressing concern that this component of the SEP
    could be misconstrued as indicating a move by the Committee to a less
    accommodative reaction function."

    In other words, the Fed is saying "that thing you guys thought justified a move higher in rates isn't exactly the best glimpse at our intentions.  As such, we'll not only tell you that, but also tell you we plan to communicate that better next time."

    Bond markets like it, but not enough to get back to yesterday's best levels.  MBS are back to unchanged on the day and about an eighth of a point higher than morning rate-sheet print times.  If we're able to hold here or improve, some aggressive lenders might consider positive reprices.  Holding or improving is still up in the air.  Momentum has been sideways since the first initial pop into stronger territory.

    Category: MBS, UPDATE
    Share:   
  • 4/9/14
    Bond Markets Weaker After 10yr Auction

    The bid-to-cover of today's auction was slightly higher than average, but well under the previous auction (2.76 vs 2.92 previously).  In and of itself, that's not too bad, but the awarded yield was .5bps higher than the 1pm when-issued yield. 

    The first move for bond markets has been into weaker territory with 10's moving up to 2.717, about 1bp higher than before the auction.  MBS are only down 1 tick from pre-auction levels, and haven't moved enough for serious reprice risk to develop. 

    FOMC Minutes are coming up at 2pm, and although market participants aren't expecting any surprises, the news always carries potential for market movement.

    Category: MBS, UPDATE
    Share:   
  • 4/9/14
    10yr Auction Preview

    Bond markets have been fairly docile all morning, and the first opportunity to see more of a reaction now arrives with the 10yr Note Auction at 1pm. There are two key metrics we can observe to get a sense of the auction's strength: demand and the yield.

    Demand is measured by the bid-to-cover ratio or BTC. The benchmark for today's auction can be taken from recent averages of the BTC from past auctions. With that in mind, 3 of the last 4 reopenings were in a range of 2.58 to 2.68, but the most recent auction was stellar, with a 2.92 BTC. Anything in the 2.6's is good. Anything more is gravy.

    The yield is measured by the "High Yield's" relationship to the 1pm "when-issued" yield. This is basically just a way for markets to trade the security before it's actually been issued, and varies slightly from the normal Treasury yields seen on your screens. The 10yr WI is currently at 2.715, but may change slightly before 1pm.

    If the "high yield" is higher than the 1pm WI, that's bad. Lower is good. The auction bidding cut-off is at 1pm, but results typically come out 90 seconds later.

    Category: MBS, UPDATE
    Share:   
  • 4/9/14
    Bond Markets Weaker Overnight, Mostly Holding Ground This AM

    In addition to the roll which accounted for a 12 tick drop in prices, Fannie 4.0s are down another 5 ticks this morning, which is anywhere from normal to strong considering 10yr yields are .0288  higher.

    The overnight session was uneventful for Treasuries in the sense that there were no scandalous headlines or economic reports that caused big movement.  Instead, bonds simply turned weaker.  Part of the weakness is the exhaustion of tradeflow momentum, meaning that the snowball buying seen yesterday finally ran out of snow.

    The other piece of the market-movement puzzle is equities markets.  After being more disconnected yesterday, stocks and bonds are once again tracking well with each other overnight and into the stock market open at 930am.

    The big events today will be the 10yr Note Auction at 1pm and FOMC Minutes at 2pm.  These are 'big' in the sense of POTENTIAL, but aren't necessarily guaranteed to cause a stir.

    Category: MBS, UPDATE
    Share:   
 
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  • 4/9/14

    As expected, there is generally no new information in the FOMC Minutes beyond what has already been gleaned from the Announcement and speeches.  Given that the day of the announcement marked a sell-off for bond markets, it stood to reason that any attempt to balance the perceptions from that day would be positive for bond markets, and that's what we're seeing in the Minutes.

    Of particular note are the following snippets:

    "Most participants also believed that, as part of the process of
    clarifying the Committee's future policy intentions, it would be
    appropriate at this time for the Committee to provide additional
    guidance in its postmeeting statement regarding the likely behavior of
    the federal funds rate after its first increase."  (clarity is good for markets)

    " A number of participants noted the overall upward shift since December
    in participants' projections of the federal funds rate included in the
    March SEP, with some expressing concern that this component of the SEP
    could be misconstrued as indicating a move by the Committee to a less
    accommodative reaction function."

    In other words, the Fed is saying "that thing you guys thought justified a move higher in rates isn't exactly the best glimpse at our intentions.  As such, we'll not only tell you that, but also tell you we plan to communicate that better next time."

    Bond markets like it, but not enough to get back to yesterday's best levels.  MBS are back to unchanged on the day and about an eighth of a point higher than morning rate-sheet print times.  If we're able to hold here or improve, some aggressive lenders might consider positive reprices.  Holding or improving is still up in the air.  Momentum has been sideways since the first initial pop into stronger territory.

    Category: MBS, UPDATE
    Share:   
  • 4/9/14

    The bid-to-cover of today's auction was slightly higher than average, but well under the previous auction (2.76 vs 2.92 previously).  In and of itself, that's not too bad, but the awarded yield was .5bps higher than the 1pm when-issued yield. 

    The first move for bond markets has been into weaker territory with 10's moving up to 2.717, about 1bp higher than before the auction.  MBS are only down 1 tick from pre-auction levels, and haven't moved enough for serious reprice risk to develop. 

    FOMC Minutes are coming up at 2pm, and although market participants aren't expecting any surprises, the news always carries potential for market movement.

    Category: MBS, UPDATE
    Share:   
  • 4/9/14

    Bond markets have been fairly docile all morning, and the first opportunity to see more of a reaction now arrives with the 10yr Note Auction at 1pm. There are two key metrics we can observe to get a sense of the auction's strength: demand and the yield.

    Demand is measured by the bid-to-cover ratio or BTC. The benchmark for today's auction can be taken from recent averages of the BTC from past auctions. With that in mind, 3 of the last 4 reopenings were in a range of 2.58 to 2.68, but the most recent auction was stellar, with a 2.92 BTC. Anything in the 2.6's is good. Anything more is gravy.

    The yield is measured by the "High Yield's" relationship to the 1pm "when-issued" yield. This is basically just a way for markets to trade the security before it's actually been issued, and varies slightly from the normal Treasury yields seen on your screens. The 10yr WI is currently at 2.715, but may change slightly before 1pm.

    If the "high yield" is higher than the 1pm WI, that's bad. Lower is good. The auction bidding cut-off is at 1pm, but results typically come out 90 seconds later.

    Category: MBS, UPDATE
    Share:   
  • 4/9/14

    In addition to the roll which accounted for a 12 tick drop in prices, Fannie 4.0s are down another 5 ticks this morning, which is anywhere from normal to strong considering 10yr yields are .0288  higher.

    The overnight session was uneventful for Treasuries in the sense that there were no scandalous headlines or economic reports that caused big movement.  Instead, bonds simply turned weaker.  Part of the weakness is the exhaustion of tradeflow momentum, meaning that the snowball buying seen yesterday finally ran out of snow.

    The other piece of the market-movement puzzle is equities markets.  After being more disconnected yesterday, stocks and bonds are once again tracking well with each other overnight and into the stock market open at 930am.

    The big events today will be the 10yr Note Auction at 1pm and FOMC Minutes at 2pm.  These are 'big' in the sense of POTENTIAL, but aren't necessarily guaranteed to cause a stir.

    Category: MBS, UPDATE
    Share:   
 
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