Afternoon Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBS Live Dashboard
MBS Hold Support Into Treasury Close. Big Ticket Events Tomorrow
We got a nice example of a 'pivot point' on the 2-day chart of Fannie 3.5 MBS as 103-10 held as support. Actually, the pivot point has been well-traveled for longer than the current 2-day period, acting as sort of a central pit stop between highs and lows for 2012.
The first major examples of technically motivated price movements around 103-10 were seen as it capped gains for th month of January on three separate and distinct occasions, finally breaking late in the month.
it was almost a perfect midpoint between January Lows and early February Highs at that time, and now it's filling a similar role as the midpoint between February and March's highs and lows. Indeed prices seem to be honing in on 103-10 as the center of the debate between higher and lower MBS prices.
This isn't the kind of pivot point that we'd expect to act as significant support or resistance in the short term. Rather, we'd expect it to be crossed several more times in the near future. But ultimately, it looks as if it will prove to be a sturdy ledge in a push higher, or a frustrating ceiling preceding a more pronounced downturn.
Tomorrow's data and events might begin to inform such gyrations as we'll get major representatives from bond market's three favorite food groups. For ECON: it's Retail sales in the morning. For TRADEFLOW CONSIDERATIONS, it's the 10yr Auction at 1pm, and for MONETARY POLICY, it's the FOMC Announcement at 2:15am.
Plenty of market moving potential here... But a definitive break outside the 4-5 month 30bp range in 10yr yields feels like a long-lost dream. Incidentally, we're OK with that as it's been just great for MBS.
ECON: US Budget Deficit Widens in February
- The monthly U.S. budget deficit widened to $232 billion in February from $223 billion the same month a year ago, partly because February had an additional day this year, the Treasury Department said on Monday.
About $11 billion in tax refunds were issued on Feb 29, helping to reduce government receipts to $103 billion compared to $111 billion in February 2011.
Government spending was $335 billion in February, just slightly above the year ago level of $333 billion.
3yr Note Auction Much Higher in Rate. Some Reprice Risk
Even before the results of today's 3yr Treasury auction, we'd received two reports of negative reprices as MBS broke thei narrow morning range, moving down from 103-13 to 103-11.
Normally, we don't expect much market impact from a 3yr auction, and while we're indeed not getting much impact, what we are getting is negative. The high yield from the auction was excruciatingly higher than the 1pm when-issued yield although the demand at those yields was in line with recent averages.
10yr Treasuries and MBS have both demonstrated small negative reactions to the auction, but they seem to have mostly run their course now. The results are barely perceptible, leave each sector at their weakest levels of the day, or close to them.
Fannie 3.5's are still up 3 ticks on the day at 103-12. 103-10 is longer-term support, and 103-16 begins a band of prices to 103-19 constituting overhead resistance. We'd hope to not fall through 103-10 today, but aren't planning any forays above 103-16 either. If things weaken past the 103-10 level, we'd look to Friday's modal highs for support--around 103-06+.
Featured Market Discussion
Alan Craft : "I think all you have to do is show a HUD with no new financing on it"
Thomas Quann : "Anyone know the new fannie rule where you dont have to wait six months to pull money out if they bought for cash? New Appraisal or purchase price from 6 months ago?"
Chris Kopec : "REPRICE: 2:28 PM - Caliber Funding Worse"
Matthew Graham : "RTRS - U.S. FEBRUARY BUDGET DEFICIT $232 BLN (CONSENSUS $229.0 BLN) VS FEB 2011 DEFICIT $223 BLN-TREASURY "
Michael Tadros : "REPRICE: 1:39 PM - Interbank Worse"
Matthew Graham : "any sort of meaningful break below 103-10 would be cause for a bit more reprice risk."
Matthew Graham : "put the answer in that alert for you AP as I was just getting ready to discuss something similar when I saw your chat come in."
Andy Pada : "MG, what is our short term range?"
Matthew Graham : "this was a big miss for 3's in terms of the high yield"
Matthew Graham : "RTRS- U.S. 3-YEAR NOTES BID-TO-COVER RATIO 3.44, NON-COMP BIDS $33.96 MLN "
Matthew Graham : "RTRS- U.S. SELLS $32 BLN 3-YEAR NOTES AT HIGH YIELD 0.456 PCT, AWARDS 94.55 PCT OF BIDS AT HIGH "
Rob Clark : "REPRICE: 12:56 PM - Provident Funding Worse"
peter pozzuoli : "REPRICE: 12:41 PM - Flagstar Worse"