Posted
The MBS AFTERNOON commentary was fairly robust. And you also have the write up on the Fed Announcement to read, so we'll keep the words to a minimum and give you some charts to consider going into the rest of the week.
Two ways to look at things at the moment...
1. You could consider the progressively higher tsy yields this week the formation of a trend supported by incrementally higher technical levels...
OR
2. You could consider the higher yields the "ratcheting" up of incrementally higher technical levels that is waiting either for confirmation or a release of it's kinetic energy by NFP, et. al...
To wit, the following chart:
This means SOMETHING... If anyone figures it out, let me know...
It might also mean something that the S&P seems cautious at best (spineless at worst):
Monday and today remind me of a bold 3 year old running into a cold ocean with the best of intentions, only to flee back to the waterline or something close to it...
Incidentally, given the steepness, and the market composition at the moment (and a bunch of other stuff too...). I'm more inclined toward option 2 above... But remember, that still puts the blame on NFP for directionality. (fundamental connection? I know... Weird, right?). Again, technical stops catalyzed by the fundamentals continue to define the marketplace.
The FN 4.0 ended the day +0-01 at 98-06 yielding 4.187%. The FN 4.5 went out the door +0-02 at 100-28 yielding 4.395%. The secondary market current coupon is 4.343%. The Current Coupon yield is +82/10yr TSY and +65/10yr swap. Tighter on the day but wider than 3pm marks.
That's it folks... The short MBS CLOSE you've always wished I'd write... But seriously, I think it's important that you read last night's close unless the content was second nature for you. It's foundational to our future... Additionally, AQ's write up on FOMC minutes is a home-run. Those two pieces are some serious artillery for the battles ahead. It's a war folks...
The Day Ahead
8:30am
Initial Claims: expected lower to 523k from 530k previously, Continuing Claims also expected lower to 5.75mln from 5.797mln
Productivity and Costs: 6.4% forecast versus 6.6% in Q2, Unit Labor Costs expected at -4.0 versus -5.9 previously.
10:00am
Freddie Mac weekly survey
4:30pm
Money Supply
Fed Balance Sheet including weekly MBS purchases
In addition, October prepayment data begins to hit after the market closes but the effects of any deviation from expectations would be more noticeable in Friday’s trade.
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