Posted
$40bn 5yr notes have been auctioned and the FOMC statement is behind us....and THE RANGE HOLDS!!!!
Pre-FOMC statement the 10yr yield rose as high as 3.51% (100 day
moving average). Post-FOMC statement the 10yr fell 12 bps to 3.40%,
where resistance was run into at the 50% retracement of Sept.9 yield
lows. After hitting the intraday low of 3.40%, the 10yr yield backed up
to 3.42%....which just so happens to be the 20 day moving
average/mid-bollinger band.
BANG BANG BANG at 3.40%...fail, move higher to 3.42%.
Here is the daily chart showing bollinger bands and support at the
100 day moving average...(support from a mortgage originators point of
view)
What does today's action tell us?
Nothing really...not yet at least. Just as the range moderated selling momentum, it moderated buying momentum.
Plain and Simple:
We're still range bound!!!! HAHAHHAHA (demented Jack Nicholson laugh).
We need a breakout below 3.40% and then a test of Sept 9 yield
lows...and we need those moves to be on strong volume.Otherwise we will just refer to it as an "outside day". Outside the range that is...
In mortgage land, the Fed announced they would slowly reduce the
pace of the MBS purchases, allowing the program to eventually end in Q1 2010.
Although one might consider this good news, MBS market participants
were mostly expecting it after the Fed voiced their exit strategy from the TSY purchase program...so no major surprises. That said..."rate sheet
influential" MBS coupon yield spreads widened up after the statement as production MBS were unable to keep up with the 12bp rally in 10s. TSYs outpeformed MBS...
In terms of price action, the rally in benchmarks led the FN 4.5 to bounce sharply off the pre-FOMC price low of 100-02+....all the way to the intraday high of 100-25. At the 5pm "TIME TO HEAD HOME" marking period, the FN 4.5 was trading +0-03 at 100-21.
The choppiness is obvious.
REPRICES FOR THE BETTER WERE REPORTED THIS AFTERNOON...
We're sorry, we know the constant RANGE BOUND RANGE BOUND RANGE BOUND can be frustrating at times...but look at
the bright side, at least we didnt break out of the range in wrong
direction. The glass is half full and mortgage rates are holding near
four month lows. YAY?
Plain and Simple: It is what it is..the range is the range until its no longer the range.
Yield Curve
2s/5s: 5bps flatter at 141bps
2s/10s: 3bps flatter at 246bps
5s/10s: 2bps steeper at 105bps
10s/30s: 3bps steeper at 78bps
READ MORE ON THE FOMC STATEMENT
HOW STOCKS ENDED THE DAY
Tomorrow's calender...
08:30--- Jobless Claims. (consensus 550,000 vs. 545,000 Continuing Claims (consensus 6.19 million vs. prior 6.23 million)
10:00--- Existing Home Sales (consensus +2.1% vs. prior +7.2%) Annual pace consensus 5.35 million vs.prior 5.24 million
10:00--- House Financial Servicers holds hearing on Systematic Risk and Resolution
13:00--- $29 billion 7 yr note auction
14:30---Senate Banking Subcommittee hearing on "Securitization of Assets: Problems and Solutions
15:00---Federal Reserve reports on weekly MBS purchases
Secondary Marketing Managers and Capital Markets Desks, if you are interested in subscribing to the same fixed income and mortgage market data we use:
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