Please note that the pricing snapshot below is from earlier in the morning before we got hit with mid-day weakness. Before that, bond markets came in to the session unchanged versus yesterday's latest levels and rallied at the open. Consumer Sentiment data was weaker than expected, but didn't really help the rally. Neither did it stoke the sell-off, but perhaps general selling pressure was lying in wait for the completion of the Fed's daily bond-buying operation which ended just after 11am. Modest weakness started at that point, but kicked into higher gear after headlines hit suggesting the White house was considering a new deal sent up by House GOP that would fund the government and raise the debt ceiling. MBS are back to unchanged levels currently.
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 11:07 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 Weaker after Sentiment Data wasn't 'Weak Enough'
We'd already made our case for a weaker-than-expected Consumer Sentiment reading. Although that technically happened, it didn't happen enough to satisfy those who were expecting to see a lower headline than 75.2 vs a previous report of 77.5. In other words, the Fiscal drama had traders prepared for a bigger surprise to the downside, and it no looks like some of this morning's positivity in bond markets may have been an attempt to get ahead of that eventuality.
In plainer terms, traders were well within their right to account for the possibility that the data would be even weaker than it was. This likely added to some of the morning's gains in Treasuries/MBS. Then when the data came in fairly close to consensus, the aforementioned defensiveness was free to melt away.
It hasn't been much to write home about as 10yr yields have moved from just under 2.65 to just over 2.66. Fannie 3.5s are off their 101-17 highs, down to 101-14 (still 7 ticks up on the day.
ECON: Washington gridlock hurts U.S. consumer sentiment
- 75.2 vs 76.0 forecast, 77.5 previously
- 12-month outlook 63.9 vs 67.5 forecast
- 12-month outlook lowest since Dec 2011
- 1 yr Inflation expectations 2.9 vs 3.3 forecast
- Despite the 76.0 forecast, markets were apparently prepared for a worse reading than 75.2. Both stocks and bond yields have moved higher since the release.
(Reuters) - U.S. consumer sentiment deteriorated in October to its weakest level in nine months as the first federal government shutdown in 17 years undermined Americans' outlook on the economy, a survey released on Friday showed.
The Thomson Reuters/University of Michigan's preliminary reading on the overall index on consumer sentiment fell to 75.2 in October, down from 77.5 in September. This was the lowest figure since January.
The early October reading fell short of the 76.0 forecast by economists recently polled by Reuters.
While the sentiment gauge declined for a third straight month, the size of the decrease was relatively small, as worries about a protracted shutdown were mitigated by some optimism about income and inflation, survey director Richard Curtin said.
"Consumer confidence posted a surprisingly small decline in early October despite widespread awareness of the government shutdown," Curtin said in a statement.
Bond Markets Sideways Overnight, Stronger into Domestic Session
Asian and European hours saw very limited movement in Treasuries with 10yrs holding a range of 2.675-2.692. Importantly, the 2.671 technical level held up firmly right until 8:20am. This can frequently be a time of day where things change or noticeably accelerate for bond markets as the the CME pit trade opens and CTA
activity ramps up.
Bond markets were right on the edge of a technical victory, holding in the 2.67's when CTAs came online as better buyers. This started a small chain reaction of short covering (traders who had been betting on higher rates being forced to buy bonds in order to cover those bets).
The "window" mentioned in this morning's commentary
was quickly "closed" no more than an hour after we pointed it out (meaning that 10yr yields quickly traversed the gap resting on 2.671, effectively defeating the technical signal that would have been very bearish for bonds, had the gap not been crossed).
Trading since then continues to be constructive. Stocks are rising in their first 15 minutes, but it hasn't slowed the roll of bond markets. The next informative event arrives at 9:55am with Consumer Sentiment. The forecast is for 76.0, but we wouldn't be surprised to see something lower given past precedent when it comes to fiscal drama. Any significant "miss" would help solidify these gains for bonds.
10yr yields are currently down to 2.65 and Fannie 3.5 MBS are up 10 ticks at 101-17.
Live Chat Featured Comments
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