Recap of Yesterday

  • $40bn 5yr TSY auction  stops out at 2.47% high yield. 3bps tail of 1pm "When Issued" yield. 2.4 Bid to Cover
  • FOMC says “Economic activity has picked up following its severe downturn”, keeps short-term interest rates at exceptionally low levels “for an extended period",  “inflation will remain subdued for some time.”, concerns for “ongoing job losses, sluggish income growth, lower housing wealth, and tight credit.”
  • Fed MBS purchase program to be extended until end of Q1 2010
  • After making new 2009 high, following the FOMC statement the dollar rallied and stocks sold off. S&P closes at 1060, lower than previous day
  • 10yr note hits intraday high of 3.51% before rallying down to 3.40% after the FOMC statement.
  • FN 4.5 hits intraday low of 100-02+ before FOMC statement. After statement FN 4.5 rallies up to 100-25. Ends day +0-03 at 100-21.
  • MBS unable to keep up with TSY rally, "rate sheet influential" yield spreads wider as TSYs outperform
  • Mortgage banker supply in $2bn range
  • MBS Current Coupon ends day at 4.378%
  • Lenders repriced for worse and for better
  • At days end rate sheets were mostly unchanged...stuck in a range near four month lows

So Far this Morning

  • SHANGHAI +0.38%, HANG SENG -2.52%, NIKKEI +1.67%, CAC -0.15%, DAX -0.1%, FTSE -0.14%,
  • 530,000 New Jobless Claims vs. consensus 550,000 and prior 551,000
  • 553,500 4-week moving average of New Jobless Claims
  • 6.138 million Continuing Claims vs. consensus 6.19 million and prior 6.261 million
  • Stock and TSY futures mostly sideways overnight...stock futures higher, TSY futures lower after Jobless Claims data

The FN 4.5 is currently +0-02 at 100-23 yielding 4.374%....

The 10yr is testing range resistance at 3.40%...

Yield Curve

2s/5s: 2bps steeper at 144bps

2s/10s: 1bps flatter at 245bps

5s/10s: 4bps flatter at 101bps

5s/30s: 4bps flater at 179bps

10s/30s: unchanged at 78bps

The dollar index is slightly stronger at 76.15. The EUR/USD is 1.4786. 

Oil prices are $0.42 cheaper. Gold is more expensive at $1,014

MND The Day Ahead

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