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  • 2:19 PM
    EU Trading is Definitely a Consideration for US Bond Markets Today

    2014-8-1 tsy bund

    Category: MBS, UPDATE
    Share:   
  • 1:57 PM
    Still Much Stronger on the Day, but Off Highs; Some Risk That We've Topped Out

    For sadistic or extra-jumpy lenders, this could technically be a reprice alert as Fannie 3.5s are 5 ticks off highs.  That said, we'd still be more likely to see the average lender reprice positively.

    That doesn't mean there's no cause for concern, just that we're only at the very leading edge of a potentially risky situation.  We're also trying to get out in front of it a bit because we can see that bond markets clearly turned a corner the moment that European markets closed.

    So the risk is that the European close marked the bounce for the day and that we could continue into weaker territory from here.  It's those next few ticks of potential weakness that could have those jumpier lenders considering negative reprices.

    Category: MBS, UPDATE
    Share:   
  • 11:11 AM
    Bond Markets Hit Best Levels on Dodged Bullets and EU Help

    Fannie 3.5s are now up 11 ticks to the best levels of the day, currently 102-07.  10yr yields are also at their best levels, down 4.5bps at 2.513.  The latest move has been in progress since 10:30am when Treasuries broke the uptrend seen in this chart:

    2014-8-1 tsy

    Additional help is coming from a European bond market rally and stock sell-off.  There has also been some big-ticket buying in Treasury futures, with one of the block trades happening right in line with the breakout in the chart above.  Such "block trades" (big-ticket trades that take place outside the exchange) often motivate additional momentum in the smaller, mainstream trading. 

    With the strong possibility of a new "short positions" (bets that rates move higher) being taken out over the past 3 days, we can also assume that this strength is forcing those shorts to 'cover,' which they accomplish by buying Treasuries.  That buying further lowers yields, drawing in more short-covering.  Virtuous cycle for us today.  Hurray.

    Category: MBS, UPDATE
    Share:   
  • 10:11 AM
    Stronger ISM Manufacturing Data Trips up Bond Markets, but Only Temporarily
    • ISM Manufacturing 57.1 vs 56.0 forecast, 55.3 previously
    • Highest since April 2011
    • All component indices were stronger than expected/previous readings

    ISM is one of the most important pieces of economic data apart from NFP/GDP.  With bond markets already running into some resistance this morning, this made a clear case for a move back in the other direction. Refreshingly, the pull-back was short lived.

    MBS had briefly moved down 4 ticks (.125) from some lenders rate sheet print times.  Technically, that's enough for a negative reprice in some cases, though it's unlikely that lenders would have included the full effects of morning price gains on NFP day. 

    Add to that the fact that the post-data weakness has already paused and we're left with a line in the sand rather than a full-fledged sell-off.  The line is convenient as it will let us know when negative reprices would start to be a consideration again. 

    For MBS, it's at 101-30 in Fannie 3.5s.  We had that moments ago, but have already bounced up to 102-01.   For Treasuries, the line is at 2.56, also seen moments ago before a bounce down to 2.545.

    Category: MBS, UPDATE
    Share:   
  • 8:45 AM
    Bond Markets Move Into Positive Territory After NFP; Could be Better, Could be Worse
    • July NFP +209k vs +233k forecast, June revised to 298k from 288k, May revised to 229k from 224k
    • Unemployment Rate 6.2 vs 6.1 forecast, 6.1 previously
    • participation rate 62.9 vs 62.8 forecast/previous
    • Private payrolls 198k vs 230k forecast, June revised toe 270k from 262k
    • Hourly earnings 0.0 vs +0.2 forecast/previous
    • Workweek unchanged at 34.5

    After coming into the domestic session at slightly weaker levels, the NFP miss has been enough to get Treasuries and MBS back into positive territory.  That's great, and much better than the alternative, but the rally is lackluster so far, and has already seen the first major bounce. 

    If we end up not gaining much ground (or even losing ground) by the end of the day, it would be a strong negative statement on the longer term trend.  Or rather, it would add to the strong negative statement on the longer term trend we received with Wednesday's GDP.  Sadly, the absence of a stronger move right out of the gate already says a lot about the current state of play in bond markets.  Uphill battle.

    Fannie 3.5s are up 4 ticks on the day at 101-31 and 10yr yields are down only half a bp at 2.552.  S&P futures moved 6-7 points higher from overnight lows, but aren't yet back to yesterday's latest levels.

    Category: MBS, UPDATE
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  • 2:19 PM

    2014-8-1 tsy bund

    Category: MBS, UPDATE
    Share:   
  • 1:57 PM

    For sadistic or extra-jumpy lenders, this could technically be a reprice alert as Fannie 3.5s are 5 ticks off highs.  That said, we'd still be more likely to see the average lender reprice positively.

    That doesn't mean there's no cause for concern, just that we're only at the very leading edge of a potentially risky situation.  We're also trying to get out in front of it a bit because we can see that bond markets clearly turned a corner the moment that European markets closed.

    So the risk is that the European close marked the bounce for the day and that we could continue into weaker territory from here.  It's those next few ticks of potential weakness that could have those jumpier lenders considering negative reprices.

    Category: MBS, UPDATE
    Share:   
  • 11:11 AM

    Fannie 3.5s are now up 11 ticks to the best levels of the day, currently 102-07.  10yr yields are also at their best levels, down 4.5bps at 2.513.  The latest move has been in progress since 10:30am when Treasuries broke the uptrend seen in this chart:

    2014-8-1 tsy

    Additional help is coming from a European bond market rally and stock sell-off.  There has also been some big-ticket buying in Treasury futures, with one of the block trades happening right in line with the breakout in the chart above.  Such "block trades" (big-ticket trades that take place outside the exchange) often motivate additional momentum in the smaller, mainstream trading. 

    With the strong possibility of a new "short positions" (bets that rates move higher) being taken out over the past 3 days, we can also assume that this strength is forcing those shorts to 'cover,' which they accomplish by buying Treasuries.  That buying further lowers yields, drawing in more short-covering.  Virtuous cycle for us today.  Hurray.

    Category: MBS, UPDATE
    Share:   
  • 10:11 AM
    • ISM Manufacturing 57.1 vs 56.0 forecast, 55.3 previously
    • Highest since April 2011
    • All component indices were stronger than expected/previous readings

    ISM is one of the most important pieces of economic data apart from NFP/GDP.  With bond markets already running into some resistance this morning, this made a clear case for a move back in the other direction. Refreshingly, the pull-back was short lived.

    MBS had briefly moved down 4 ticks (.125) from some lenders rate sheet print times.  Technically, that's enough for a negative reprice in some cases, though it's unlikely that lenders would have included the full effects of morning price gains on NFP day. 

    Add to that the fact that the post-data weakness has already paused and we're left with a line in the sand rather than a full-fledged sell-off.  The line is convenient as it will let us know when negative reprices would start to be a consideration again. 

    For MBS, it's at 101-30 in Fannie 3.5s.  We had that moments ago, but have already bounced up to 102-01.   For Treasuries, the line is at 2.56, also seen moments ago before a bounce down to 2.545.

    Category: MBS, UPDATE
    Share:   
  • 8:45 AM
    • July NFP +209k vs +233k forecast, June revised to 298k from 288k, May revised to 229k from 224k
    • Unemployment Rate 6.2 vs 6.1 forecast, 6.1 previously
    • participation rate 62.9 vs 62.8 forecast/previous
    • Private payrolls 198k vs 230k forecast, June revised toe 270k from 262k
    • Hourly earnings 0.0 vs +0.2 forecast/previous
    • Workweek unchanged at 34.5

    After coming into the domestic session at slightly weaker levels, the NFP miss has been enough to get Treasuries and MBS back into positive territory.  That's great, and much better than the alternative, but the rally is lackluster so far, and has already seen the first major bounce. 

    If we end up not gaining much ground (or even losing ground) by the end of the day, it would be a strong negative statement on the longer term trend.  Or rather, it would add to the strong negative statement on the longer term trend we received with Wednesday's GDP.  Sadly, the absence of a stronger move right out of the gate already says a lot about the current state of play in bond markets.  Uphill battle.

    Fannie 3.5s are up 4 ticks on the day at 101-31 and 10yr yields are down only half a bp at 2.552.  S&P futures moved 6-7 points higher from overnight lows, but aren't yet back to yesterday's latest levels.

    Category: MBS, UPDATE
    Share:   
 
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