Posted
Don't panic... This "enemy" is the same one you already met earlier in the form of the dowward sloping trend channel in MBS prices. But another trend put a stop to that pain, provided what seemed like some much needed support for falling prices and rising tsy yields. Although, once you see who the friend is, you may come to feel, as I do, that it was there all along. And MBS didn't even need anyone to save the day in the first place. Why might this be? Because no friend has been so steadfast of late than the boundaries of the long term ranges. Granted, this is in play to a greater extent as tsy's found support at 3.49, which happens to be the exact high yield mark of the friday that led up to last week's supply.
The 1044 to 1045 level looks like a good stopping point as far as the S&P will tell you in the chart below. As we continually discuss, prices traded AROUND that level near the end of the day, and trends of lower highs and higher lows converged more or less on the bullseye.
MBS and tsy's seem poised to simply drift into the close as well. If anything, the support levels seem to be triggered for the yield curve which always sets the stage for an exciting bludgeoning of data tomorrow.
The FN 4.0 is trading -0-06 at 98-04 yielding 4.193% while the FN 4.5 is -0-05
at 100-26 yielding 4.403%. The secondary market coupon is 4.351%. The Current
Coupon is +88/10yr TSY and +70/10yr swap.
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