Yawn. After a lunch hour scare the FN 5.0 current coupon MBS has continued on its intraday trend of BANG BANG BANG into overhead resistnace at 102-00...again and again and again. BANG BANG BANG!!!
The 10 yr ticked up to 3.50 right around the same time the FN 5.0 moved into the 101-25 range, no big deal there...just some profit taking and repositioning. Flows aren't too busy in MBS proxy benchmarks...well that of course depends on your coupon of choice...meaning TSY trade flows are a little busier on the short end of the yield curve. This matters more for the "up in coupon" crowd who is more likely to compare returns to 2-3 yr TSY notes/swaps (arbitragers). Mortgage rate watchers dont have much worry reason about that side of the stack. On your side of the duration world (5/10 year TSY notes)....
The yield curve is really stagnant ahead of quarter end...not seeing much aggression (volatility) towards testing Friday's rally, in either direction, as market participants appear content to let yield lie at current levels. Nonetheless the yield curve is flatter...these briefs blips in volatility may continue but for the most part we would expect the holiday shortened work week and the early release of Non Farm Payrolls to keep TSYs RANGE BOUND!!!! Going one way or another should have a leash, we'' see some casual bouncing, testing/retesting/poking/prodding at key technical resistance/support levels and pivot points. Again..."rate sheet influential" MBS coupon price fluctauations are more a function of sellers updating price tables (hedge ratios) as TSY prices bounce around a range, not too many demand side implications behind the choppiness in FN 5.0s.
The dollar is holding up ok...which is surprising after a certain event that occurred on Friday. Since flows are slow...lets play a little game. Anyone know why I would have expected the dollar to be getting beat on a little more than it is today?
Come on! Someone beat Edgar to the punch here....
2s vs. 10s: 237bps
Ugh...would hate to be an MBS market maker right now! I bet their heads are spinning with updated price tables. Anyway as I told Bobby D. in the comments of the last blog post....originators have been light supply sellers today. Volume is low and flows are paltry.
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