Bond markets began the day just barely in the green after a disconcerting overnight session. Things were more tenuous in the earlier morning hours when 10yr yields rose as high as 2.06 before beginning to catch a few breaks from Euro-zone grumblings and weaker equities markets. Morning data was uneventful to say the least and tradeflows continue to dominate the price action with some big block trades in 10yr Treasury Futures earlier. Since the opening bell, equities have continued to help with S&P's completely erasing all of Friday's gains. Treasuries and MBS can't say the same for their losses (as in they haven't fully made it back to their better territory from Friday, but they HAVE, at least recovered a majority of the post-NFP losses.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing
is available via MBS Live.
Pricing as of 11:06 AM EST
Morning Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts
and updates issued via email and text alert to MBS Live subscribers
Bond Markets At Best Levels Ahead Of POMO Conclusion
Today's permanent open market operation (aka: POMO) for the NY Fed is in the very relevant 7-9 year maturity range (originally 10yr Notes). All too often, the 11:00am conclusion of POMO leads to at least a modicum of volatility in bond markets and sometimes an outright reversal.
Both 10's and MBS look to be hitting their best levels of the day right at the POMO conclusion, and right as the 10yr approaches the well traveled pivot at 1.97. We'd expect some measure of resistance here anyway, but are on guard for it being more pronounced due to the timing. Fannie 3.0s are currently up 12 ticks at their own important short term inflection point at 103-16.
ECON: Factory Orders Miss Just Slightly, No Market Reaction
- Factory Orders +1.8 vs +2.2 Consensus
- December Durable Orders Revised to 4.3 from 4.6
- Market Reaction: none
New orders for manufactured goods in December, up
three of the last four months, increased $8.6 billion or
1.8 percent to $484.8 billion, the U.S. Census Bureau
reported today. This followed a 0.3 percent November
decrease. Excluding transportation, new orders
increased 0.2 percent.
Shipments, up five of the last six months, increased
$1.8 billion or 0.4 percent to $484.9 billion. This
followed a 0.3 percent November increase.
Unfilled orders, up six of the last seven months,
increased $7.9 billion or 0.8 percent to $991.7 billion.
This followed a slight November increase. The unfilled
orders-to-shipments ratio was 6.12, down from 6.13 in
Inventories, up following two consecutive monthly
decreases, increased $0.5 billion or 0.1 percent to $615.5
billion. This followed a slight November decrease. The
inventories-to-shipments ratio was 1.27, unchanged from
Bond Markets Holding Gains. Stock Lever Helping.
Bond markets traded in weaker territory for the entirety of the overnight session with 10's creeping as high as 2.059 after a block trade of 10yr Futures at 4:22am. But a negative earnings surprise from Commerzbank and widening EU peripheral spreads helped German Bunds begin to ratchet to lower yields with Treasuries following reluctantly.
As domestic market participants began trading, block trades arrived on the other side of the table with the biggest 10yr ticket just before 8:20am. That helped extend a "risk-off" trade that was already underway with equities and Treasury yields both moving down relatively briskly into the 8am hour.
MBS are noticeably appreciative of benchmark yields' attempts to hold below Friday's highs with Fannie 3.0s up 9 ticks at 103-14, their session highs. The stock lever has been well connected and post-opening-bell, has given some pause to the morning Treasury/MBS rally. Amid light econ data (just Factory Orders coming up at 10am), further stock/bond connectivity is a strong possibility.
Live Chat Featured Comments
Mike Drews : "So who thought we'd test 1.97 today?"
Matthew Graham : "RTRS- U.S. DEC DURABLES ORDERS REVISED TO +4.3 PCT FROM +4.6 PCT "
Matthew Graham : "RTRS - U.S. DEC FACTORY ORDERS +1.8 PCT (CONSENSUS +2.2 PCT) VS NOV -0.3 PCT (PREV UNCHANGED) "
Jeff Anderson : "And they'll keep the MI on for 40 years for a 30 year loan."
Victor Burek : "they will probably do it when they raise the annual to 3.00"
Ira Selwin : "They were talking about it, but haven't done it yet."
Matt Hodges : "i'm reading 2013-04, and I thought HUD was moving the 6%seller concessions down to 3%. Did that not happen?"
Brayden Alexander : "Hope we replicate Fridays start but ignore the finish. "
Jeff Anderson : "GM, all. Looks like the Treasury/MBS power was turned back on overnight. Thank you, Europe."
Gus Floropoulos : "Feels like a bit of a tug of war at these levels. Hope the bond bulls succeed "
John Tassios : "also, if congress passes that new refi bill, that may open up new applications too......"
John Tassios : "SV: I just read same article / if that comes true and 10 year finishes at 1.65 and end of year, we should have another good year"
Scott Valins : "GM All. Pro-bond article on Bloomberg yesterday http://www.bloomberg.com/news/2013-02-04/no-bear-market-for-treasuries-seen-after-january-decline.html"
Anthony Hicks : "Would rather start bad and end good unlike Friday"
Victor Burek : "europe jitters helping"
John Tassios : "10 year coming back a bit"