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You are viewing Micro News from Thursday, May 1, 2014 - View all recent Micro News
  • 5/1/14
    Snowball Buying and Positive Reprices

    10yr yields had been careful to avoid dipping below yesterday's latest levels until after all of this morning's data was out of the way.  Once it was, a glut of buying came through in spite of the as-expected ISM data.  This can be explained in part simply by the balance of the morning's data being slightly weaker, but the pace of the rally suggests 'tradeflow considerations' adding to the positivity behind the scenes.

    (what are tradeflow considerations?)

    After moving below 2.646, 10yr yields found their next technical ledge at 2.62 and bounced excessively until 11:42.  The resulting break led to another flush of momentum with traders who had been betting on a move higher in rates being forced to buy and cover their losses. 

    10's are now down to 2.61, but made it as low as 2.603--effectively the bottom end of the 3-month range.  MBS are underperforming today, but still following Treasuries.  Fannie 4.0s are up 7 ticks at 104-31.  Several lenders have already repriced positively and the possibility remains at current levels.

    Category: MBS, UPDATE
    Share:   
  • 5/1/14
    Bond Markets Improve After ISM and Construction Spending Data
    • ISM Manufacturing PMI 54.9 in April vs 54.3 forecast
    • New Orders 55.1 vs 55.1 previously
    • Employment Index 54.7 vs 52.8 forecast

    This data could be argued either way.  On the one hand, we have stronger-than-expected employment a day ahead of NFP, but the stagnation in new orders is--well... stagnant.

    The other data out at 10am, Construction Spending, was less equivocal.

    • March Construction Spending +0.2 vs +0.5 forecast
    • February revised to -0.2 from 0.1

    Construction spending isn't typically a big market mover and especially not compared to ISM, but in today's case, it could be playing sort of a "tie-breaking vote" role.  The other, probably better consideration is that ISM was something worth waiting for earlier this morning when Jobless Claims came out much weaker than expected. 

    In other words, market participants were certainly waiting on ISM to some extent, in order to round out the morning of economic data.  All the votes are in now, and the the bias is economically weaker, thus stronger for bond markets.

    Fannie 4.0s are up 5 ticks at the moment, to 104-29.  10yr yields are down 2.4bps at 2.624.

    Category: MBS, UPDATE
    Share:   
  • 5/1/14
    Slightly Weaker Overnight, Holding Ground After Mixed Data

    The overnight session was very quiet with most of Europe and some of Asia out for May Day.  Treasuries were just slightly weaker to start the session, but not enough for yields to move above yesterday's pre-FOMC levels.

    830am brought one positive report and one negative report, leaving bond markets sideways, but slightly improved from the weaker morning levels.

    The Bad Data (good for MBS, Treasuries)

    • Jobless Claims 344k vs 319k forecast, 330k previously
    • 4-week average rose to 320k from 317k previously
    • Continued Claims 2.771 million vs 2.708 forecast

    The Good Data (bad for MBS, Treasuries)

    • Consumer Spending +0.9 in March vs +0.6 forecast
    • Biggest rise for spending since August 2009
    • Personal Income +0.5 vs +0.4 forecast

    These reports have more or less canceled each other out, leaving bond markets sideways at just-barely-weaker levels.  Fannie 4.0s are down 1 tick at 104-24 and 10yr yields are up less than 1bp at 2.657.

    Category: MBS, UPDATE
    Share:   
 
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  • 5/1/14

    10yr yields had been careful to avoid dipping below yesterday's latest levels until after all of this morning's data was out of the way.  Once it was, a glut of buying came through in spite of the as-expected ISM data.  This can be explained in part simply by the balance of the morning's data being slightly weaker, but the pace of the rally suggests 'tradeflow considerations' adding to the positivity behind the scenes.

    (what are tradeflow considerations?)

    After moving below 2.646, 10yr yields found their next technical ledge at 2.62 and bounced excessively until 11:42.  The resulting break led to another flush of momentum with traders who had been betting on a move higher in rates being forced to buy and cover their losses. 

    10's are now down to 2.61, but made it as low as 2.603--effectively the bottom end of the 3-month range.  MBS are underperforming today, but still following Treasuries.  Fannie 4.0s are up 7 ticks at 104-31.  Several lenders have already repriced positively and the possibility remains at current levels.

    Category: MBS, UPDATE
    Share:   
  • 5/1/14
    • ISM Manufacturing PMI 54.9 in April vs 54.3 forecast
    • New Orders 55.1 vs 55.1 previously
    • Employment Index 54.7 vs 52.8 forecast

    This data could be argued either way.  On the one hand, we have stronger-than-expected employment a day ahead of NFP, but the stagnation in new orders is--well... stagnant.

    The other data out at 10am, Construction Spending, was less equivocal.

    • March Construction Spending +0.2 vs +0.5 forecast
    • February revised to -0.2 from 0.1

    Construction spending isn't typically a big market mover and especially not compared to ISM, but in today's case, it could be playing sort of a "tie-breaking vote" role.  The other, probably better consideration is that ISM was something worth waiting for earlier this morning when Jobless Claims came out much weaker than expected. 

    In other words, market participants were certainly waiting on ISM to some extent, in order to round out the morning of economic data.  All the votes are in now, and the the bias is economically weaker, thus stronger for bond markets.

    Fannie 4.0s are up 5 ticks at the moment, to 104-29.  10yr yields are down 2.4bps at 2.624.

    Category: MBS, UPDATE
    Share:   
  • 5/1/14

    The overnight session was very quiet with most of Europe and some of Asia out for May Day.  Treasuries were just slightly weaker to start the session, but not enough for yields to move above yesterday's pre-FOMC levels.

    830am brought one positive report and one negative report, leaving bond markets sideways, but slightly improved from the weaker morning levels.

    The Bad Data (good for MBS, Treasuries)

    • Jobless Claims 344k vs 319k forecast, 330k previously
    • 4-week average rose to 320k from 317k previously
    • Continued Claims 2.771 million vs 2.708 forecast

    The Good Data (bad for MBS, Treasuries)

    • Consumer Spending +0.9 in March vs +0.6 forecast
    • Biggest rise for spending since August 2009
    • Personal Income +0.5 vs +0.4 forecast

    These reports have more or less canceled each other out, leaving bond markets sideways at just-barely-weaker levels.  Fannie 4.0s are down 1 tick at 104-24 and 10yr yields are up less than 1bp at 2.657.

    Category: MBS, UPDATE
    Share:   
 
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