AT A GLANCE:
- Home builder index unexpectedly declines... This proves to be the most interesting news of the day after 10 fruitless hours of waiting...
- Prospective buyer traffic noticeably lower from 17 to 14 on the index
- Chalked up largely to tax credit.
- NAHB urging congress to extend
- Volume Below Normal
- MBS 2 ticks up on the day. with 4.5 at 100-26
- Yield curve massively flatter with 2s10s down to 242bps.
- Flattening also reflected in preference for duration in MBS as higher coupons end in the red on the day... 104 and and 105 handles currently seen to be too rich for 5.5's and 6.0's respectively
- Housing Starts and PPI tomorrow as well as the continuation of Fed Homecoming week with Plosser.
After some morning volatility and a fairly directional rally in stocks, MBS and Tsy's settled into a range and Stocks seemed to hit the wall at 1100 on the S&P and 10,100 on the Dow. Go Binary! We discussed the 100-28 in MBS and the 3.38 level in tsy's earlier today and they turned out to be fairly good proxies for whatever range markets were trading today--when they were actually trading (low volume).
It should be noted that this isn't the recent and more bullish range in MBS that had us bounce of 100-28 AS A FLOOR, but rather, appears to be an extension of the new range that took shape with a series of lows marked in September.See chart below which backs the periodicity out to the daily view to give a better sense of range.
So from the standpoint of cash market tsy's and MBS, we're very much range-bound. That's mostly to be expected on a data-free day with limited headline drama. Even the phenomenal Apple earnings after the bell have done little to bump tsy's off their course in after hours trade. The morning may hold a different fate, but with the arrival of data in the form of PPI and housing starts, plus the uncertainty about the "mysterious" stock stall at 1100 today, anything's possible on Fed Homecoming week.
To punctuate that thought, check the mixed signals being given off in tsy futures at the moment. Two tightly packed horizontal price levels. Current prices are above one and below the other...
This is more of a curiosity than something of major significance. With only 571k contracts traded, significance would be a hard case to make for most movements occurring this close to the range. But if you like, read the MBS, tsy, and futures markets inability to break ranges today as further evidence of uncertainty awaiting that higher-kinetic-energy event to push prices outside of established ranges and away from the most gravitationally dense price levels.
MBS Market Alerts
