Good Morning. The sky is once again gray and the ominous smell of another winter storm has settled in over the area. This spells trouble for a region that has already experienced at least 2ft of powder (more wet snow than powder actually). While many are still stuck in their homes, undoubtedly stir crazy by now, the thunder snow has served as an economic opportunity for others.

Anyone with a plow, a snow blower, or simply an extra shovel could be out earning a few extra bucks. For many the opportunity cost is too high, for others this is an opportunity to make up lost ground on a years worth of scattered work and skimpy paychecks.

The transfer of wealth that occurs in times of disaster and hardship is amazing. Think of it this the moment, companies are paying between $250 and $300 an hour for snow removal. If you have a large parking lets say takes at least 24 hours of plowing to get that space cleaned and maneuverable. 

Using $275/hour....24 hours of work = $6,600.

This is a baseline example. Imagine how many parking lots are in the DC/Baltimore metro area.

For many this blizzard is nothing more than a nuisance, for was a long-waited opportunity to pick up a paycheck. The transfer of wealth from these storms will be MASSIVE. Now the question is..


Paying credit card bills? Catching up on the mortgage? Fixing broken snow removal equipment? Food? Valentines Day? Who knows...either way there will be more money to be spent in the DC and MD metro area.

Attendance was low in the rates market yesterday as traders dealt with a dearth of data and lack of headline events. Prices and yields stuck to a tight range...making for an uneventful session. 

MG recapped the day HERE

Vic explained that the week ahead for mortgage rates was dependent upon pending Treasury supply and the Stock Lever HERE

After a week's worth of weakness, overseas equities made small positive progress in the overnight session. Here is the scorecard: SHANGHAI +0.47%, HANG SENG +1.22%, NIKKEI -0.19%, DAX +0.41%, CAC +0.23%, FTSE +0.56%

The story is the same domestically. Improvements in the S&P are extending over into today.

In the rates market, the 3.375 coupon bearing 10 year Treasury note yield is HIGHER, now at 3.60%.  Below is a chart of the March 10 year Treasury futures contract. Notice the slow and steady downtrend that has occurred since prices peaked midday on Friday.

The same trend line is apparent in "rate sheet influential" MBS as well. We are currently testing the 101-06 "FTQ rally" support level. Price appreciations over 101-06 were a function of panic selling in stocks and a re-allocation into risk free Treasuries. Those gains are being given back now. If this retracement continues our next "bargain buying" opportunity lies at the 101-00 pivot. If that price level is broken, we expect to head toward 100-24. Rate sheet rebate will be worse this morning. It could get even worse if 101-00 is broken.

While all "flight to quality" progress has not been lost, that sentiment is surely being tested today. The two day time frame of no econ data and minimal headline news is giving market participants a chance to re-evaluate the extent to which they "SOLD STOCKS NOW ASK QUESTIONS LATER"...later was then, this is now, and questions are being asked. Was the sovereign debt induced equity side panic really warranted? Are stocks now a bargain? Was the recent rally in Treasuries not backed by long term biases toward lower rates? I say yes...but the debt crisis hasn't been solved and there is much headline news left to hit the wires.

In the mean time, barring any major events that shifted long term perceptions of economic reality, 3.57% appears to be the bottom of our developing rates range (which used to be 3.27 to 3.51). The top side of that range is still in question...

In the mean time, its still a trader's world and we're still living in it. We continue to watch for volume spikes, are mindful of momentum, and attentive of the market's current position and strategy. (long or short?flatter or steeper?)


NEXT EVENT AFTER THAT: $40 billion 3 year notes

PS. today is notification day in MBS world. That means MBS prices will seemingly fall later this afternoon as the February TBA MBS coupon begins the settlement process. Watch your back...I might get sneaky with a little late afternoon shenanigans. :-D