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You are viewing Micro News from Friday, May 30, 2014 - View all recent Micro News
  • 5/30/14
    Bond Markets Lose Ground Following 3pm Treasury Close.

    While Treasuries and MBS both continue trading until 5pm, the CME pit trading for Treasuries ends at 3pm.  For many firms, this is the end of the day in Treasuries.  In today's case, it's also the end of the month.  Any legitimate or opportunistic trading that had been driven by month-end buying needs subsides for the most part and whatever's left over has an outsized effect on trading levels. 

    If it helps, think of this dynamic like an imaginary wholesale grocery swap meet where Costco and Walmart go to buy and sell in bulk with hundreds of small to medium suppliers.  The suppliers themselves would also be buying and selling from each other to some extent.  If this imaginary grocery swap meet ran on the Treasury market's calendar, at 3pm, Costco and Walmart, along with a majority of the other attendees would leave the building.  In the smaller, less liquid market that remains, the price of certain groceries could quickly change depending on who is left and what the supply and demand is like.

    In the same sort of way, the post 3pm trade has seen prices fall in bond markets, but it's nothing too severe for now.  10yr yields moved up from 2.458 to 2.473.  Fannie 3.5s are off 3 ticks from afternoon highs, but only 2 ticks from the sustained highs.  This isn't quite grounds for negative reprice risk yet, but we can only speak to reprice risk resulting from MBS Prices.  A slightly volatile price environment on the last day of the month can result in reprices that don't always make sense, for better or worse--usually worse.  We don't have any reason to expect them at this point.  Just something to keep in mind if you're floating with a lender who has historically put out one of those late day non sequitur reprices.

    Category: MBS, UPDATE
    Share:   
  • 5/30/14
    Positive Reprice Potential Increasing as MBS Approach Highs

    Not only are MBS prices approaching their highs of the day, but they've also put in 6-9 ticks of improvement from many lenders' rate sheet print times. 

    The day's trading motivations are centered on month-end position squaring and technical levels.  The mid 2.48's in 10yr yields proved to be a good short-term technical level, prompting supportive buying on this morning's weakness.  Things have been pretty calm since then with10yr yields back down to 2.46.

    Fannie 3.5s are 3 ticks better on the day (again, with 6-9 ticks of improvement since rate sheet time) to 103-00.

    Category: MBS, UPDATE
    Share:   
  • 5/30/14
    Still in Weaker Territory, but Noticeably Trying to Bounce

    Treasuries and MBS are no better off than the last alert, but neither are they any worse.  Trading has been flat to slightly supportive since Chicago PMI.  10yr yields have keyed in on the first short-term technical target of 2.484 following the break of the longer-term inflection point at 2.47.  Active 2-way trading just on either side of 2.484 is currently acting as a supportive ceiling, but it's still a bit too soon to say the 2-day trend toward weaker levels is defeated.

    10's are down to 2.477 currently.  Fannie 3.5s have similarly dialed back their weakness, moving up to 102-26 from 102-23 lows .  There are no more significant economic reports today and it's not likely that markets would care if there were. 

    In the coming hours, the true strength (or lack thereof) of the recent rally will begin to be revealed.  Either yesterday was wholly exuberant, or a mild overshooting of the preferred positioning ahead of next week's ECB Announcement.

    In other words, any ability for 10's to gravitate toward 2.47 would be "strong."  The lower we move from there, the more exceptional the assessment of organic strength (or ECB expectations!).  If we head weaker, 2.484-ish would be perfectly acceptable, 2.504 would be understandable, even if disappointing.  And anything closer to 2.55 would be an eye-opener as to the aforementioned exuberance. 

    Category: MBS, UPDATE
    Share:   
  • 5/30/14
    Negative momentum is increasing in bond markets both...
    MBS Updates are a service provided to MBS Live! subscribers only.
    Learn More | Start a Free Trial | View MBS Prices
    Category: MBS, alert
    Share:   
  • 5/30/14
    Both MBS and Treasuries had been doing an OK job of...
    MBS Updates are a service provided to MBS Live! subscribers only.
    Learn More | Start a Free Trial | View MBS Prices
    Category: MBS, alert
    Share:   
  • 5/30/14
    Bond Markets Improve Temporarily After Weak Consumer Spending Data

    Bond markets had a surprisingly decent overnight session, merely consolidating yesterday's losses at sideways, slightly higher levels.  10yr yields never went above 2.484 and have held under the important 2.47 level so far in the domestic session, but are RIGHT there at the moment (2.4679).  Similarly, MBS opened in line with yesterday's latest levels and have gone no lower.

    The first move of the day was positive following a weaker-than-expected report on Consumer Spending.  Here are the details from the Incomes and Outlays data:

    • April spending -0.1 vs +0.2 forecast.  First decline since April 2013
    • April incomes +0.3 vs +0.3 forecast
    • Year-over-year PCE Price Index +1.6 vs +1.1 in March, biggest increase since Nov 2012
    • Inflation-adjusted consumer spending -0.3 vs +0.8 in March

    Treasury yields fell to 2.452 after the data and MBS rallied to 103-01 in Fannie 3.5s.  Both have since moved back to the weaker levels of the morning, but haven't broken them.  The next major data is Chicago PMI at 9:45, but a big beat/miss can move markets noticeably at 9:42am (some market participants receive the data 3 minutes early).

    Category: MBS, UPDATE
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  • 5/30/14

    While Treasuries and MBS both continue trading until 5pm, the CME pit trading for Treasuries ends at 3pm.  For many firms, this is the end of the day in Treasuries.  In today's case, it's also the end of the month.  Any legitimate or opportunistic trading that had been driven by month-end buying needs subsides for the most part and whatever's left over has an outsized effect on trading levels. 

    If it helps, think of this dynamic like an imaginary wholesale grocery swap meet where Costco and Walmart go to buy and sell in bulk with hundreds of small to medium suppliers.  The suppliers themselves would also be buying and selling from each other to some extent.  If this imaginary grocery swap meet ran on the Treasury market's calendar, at 3pm, Costco and Walmart, along with a majority of the other attendees would leave the building.  In the smaller, less liquid market that remains, the price of certain groceries could quickly change depending on who is left and what the supply and demand is like.

    In the same sort of way, the post 3pm trade has seen prices fall in bond markets, but it's nothing too severe for now.  10yr yields moved up from 2.458 to 2.473.  Fannie 3.5s are off 3 ticks from afternoon highs, but only 2 ticks from the sustained highs.  This isn't quite grounds for negative reprice risk yet, but we can only speak to reprice risk resulting from MBS Prices.  A slightly volatile price environment on the last day of the month can result in reprices that don't always make sense, for better or worse--usually worse.  We don't have any reason to expect them at this point.  Just something to keep in mind if you're floating with a lender who has historically put out one of those late day non sequitur reprices.

    Category: MBS, UPDATE
    Share:   
  • 5/30/14

    Not only are MBS prices approaching their highs of the day, but they've also put in 6-9 ticks of improvement from many lenders' rate sheet print times. 

    The day's trading motivations are centered on month-end position squaring and technical levels.  The mid 2.48's in 10yr yields proved to be a good short-term technical level, prompting supportive buying on this morning's weakness.  Things have been pretty calm since then with10yr yields back down to 2.46.

    Fannie 3.5s are 3 ticks better on the day (again, with 6-9 ticks of improvement since rate sheet time) to 103-00.

    Category: MBS, UPDATE
    Share:   
  • 5/30/14

    Treasuries and MBS are no better off than the last alert, but neither are they any worse.  Trading has been flat to slightly supportive since Chicago PMI.  10yr yields have keyed in on the first short-term technical target of 2.484 following the break of the longer-term inflection point at 2.47.  Active 2-way trading just on either side of 2.484 is currently acting as a supportive ceiling, but it's still a bit too soon to say the 2-day trend toward weaker levels is defeated.

    10's are down to 2.477 currently.  Fannie 3.5s have similarly dialed back their weakness, moving up to 102-26 from 102-23 lows .  There are no more significant economic reports today and it's not likely that markets would care if there were. 

    In the coming hours, the true strength (or lack thereof) of the recent rally will begin to be revealed.  Either yesterday was wholly exuberant, or a mild overshooting of the preferred positioning ahead of next week's ECB Announcement.

    In other words, any ability for 10's to gravitate toward 2.47 would be "strong."  The lower we move from there, the more exceptional the assessment of organic strength (or ECB expectations!).  If we head weaker, 2.484-ish would be perfectly acceptable, 2.504 would be understandable, even if disappointing.  And anything closer to 2.55 would be an eye-opener as to the aforementioned exuberance. 

    Category: MBS, UPDATE
    Share:   
  • 5/30/14
    Negative momentum is increasing in bond markets both...
    MBS Updates are a service provided to MBS Live! subscribers only.
    Learn More | Start a Free Trial | View MBS Prices
    Category: MBS, alert
    Share:   
  • 5/30/14
    Both MBS and Treasuries had been doing an OK job of...
    MBS Updates are a service provided to MBS Live! subscribers only.
    Learn More | Start a Free Trial | View MBS Prices
    Category: MBS, alert
    Share:   
  • 5/30/14

    Bond markets had a surprisingly decent overnight session, merely consolidating yesterday's losses at sideways, slightly higher levels.  10yr yields never went above 2.484 and have held under the important 2.47 level so far in the domestic session, but are RIGHT there at the moment (2.4679).  Similarly, MBS opened in line with yesterday's latest levels and have gone no lower.

    The first move of the day was positive following a weaker-than-expected report on Consumer Spending.  Here are the details from the Incomes and Outlays data:

    • April spending -0.1 vs +0.2 forecast.  First decline since April 2013
    • April incomes +0.3 vs +0.3 forecast
    • Year-over-year PCE Price Index +1.6 vs +1.1 in March, biggest increase since Nov 2012
    • Inflation-adjusted consumer spending -0.3 vs +0.8 in March

    Treasury yields fell to 2.452 after the data and MBS rallied to 103-01 in Fannie 3.5s.  Both have since moved back to the weaker levels of the morning, but haven't broken them.  The next major data is Chicago PMI at 9:45, but a big beat/miss can move markets noticeably at 9:42am (some market participants receive the data 3 minutes early).

    Category: MBS, UPDATE
    Share:   
 
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