One of our colleagues put it best a moment ago when he said: "looks like the market isn't moving much... Headed to lunch..."
Indeed after an exceedingly muted response to the treasury auction which has seen us neither rise or fall more than 2 ticks, everyone's permission slips to exit the building for lunch have now been signed. After ticking down to 101-19, MBS look fairly stable at 101-21. The 10yr tsy continues to fight off the evil ceiling at 3.27. Although it bounced right around that level twice--once before and once after the auction--it's actually at 3.255 at the moment. The star of today's ball, the 3yr is very much as it has been: around 1.38.
As mentioned in the previous blog post, this auction was fairly average, perhaps leaning slightly to the positive side. The 50% indirect bid is likely a surprise to the folks who think China is the only foreign nation with money as they are out today, yet we still managed a healthy indirect bid. AQ mentioned this would likely be the case in the previous commentary. Cheers to you AQ!
He also mentioned concessionary selling/positioning ahead of auction results and a better-than-expected result could keep us south of 3.27 in the 10yr. With the SLIGHTLY better than expected result, we are SLIGHTLY south of 3.27 (another cheers AQ! Now I'm going to need those keys...). As you may recall, this is a critical technical level for the 10yr tsy. And if we're not above it, we're below it. And if we're below it, we're happy for now. So if the rest of the day followed by tomorrow's auction and data permit the same ground-holding, we'll have some well-tested confirmation of these heady new trends. That's a cart ahead of the horse for now, but concerning said cart, at the very least, the wheels have not yet fallen off...
MBS Market Alerts
