Wednesday 9/3 ... Open...
Wed, Sep 3 2008, 7:29 AM
- Pretty Calm overnight, opened level with yesterday
- currently down 2 ticks at 101-03
- Lehman News Overnight, KDB in negotiations to buy, stock opens down. Overall = uncertainty for a major player in MBS market. Could be good, could be bad. No one's sure as no one can remember the last time a Korean investment group bought 25% of one of the largest US Financials
- Stock futures were down overnight, but the Dow opened almost even likely adding a modicum of pressure to whatever was baked-in to bonds.
- Spreads continue to widen slightly with the 10 and 5 years slightly up
- "ya can't win 'em all every day, so we're gonna have to see a down day every now and then even if MBS keep improving. The key level we're looking to hold today would be both psychological and technical at 101-00." - me
- current sentiment is uncertain at best. Basically, we are "looking for the bid," or in english, desperately seeking some buying demand to snatch up the great spreads on MBS. As you know, there are many participants in this market. It's as dramatic as Days of Our Lives sometimes, and recent memory confirms:
- "real money" players (banks, insurance funds, etc...) are priced out of the market a bit after the recent rise in current coupons. They prefer to buy at a heavier discount and with the 5.5 approaching PAR almost as fast as the 6.0 is departing from it, they're wondering what to buy.
- "fast money" (hedge funds, money managers, etc...), which is probably the most nimble and versatile player (remember that banks, as referenced above in "real money" do not hold coupons when the price rises over PAR. So they are out of the game on 6.0's, and may be hesitant to buy 5.5's if the market continues to improve, but Asia and "fast money" may have to move the markets enough for "real money" to see the price they want. In the words of one MBS analyst today, fast money is "left to do the heavy lifting as Asia contemplates US Markets" (see KDB story above)
- Gained a tick while typing, now at 101-04
- Float unless advised otherwise.
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