MBS Live: MBS Morning Market Summary
Things have been quiet so far this morning, both in terms of volume and volatility. We've seen just over 300k contracts traded in 10yr Futures (a reasonable proxy for bond market volume) by 11am. In contrast, it's not uncommon to see 300k contracts traded by 815-840am on busier days. Both 10yr yields and Fannie 3.5 MBS have held inside their respective highs and lows from the first hour of trading. There's nothing on the calendar to inspire hope that the current situation will change, so all we can really do is watch for a break of those ranges and see if it's accompanied by an unexpected uptick in volume. Otherwise, enjoy the unscheduled extension of the long weekend.
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 11:05 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 this morning.
10:19AM :
ALERT ISSUED:
Bond Markets Continue Holding Friday's Gains in Light Volume
Today might as well be an extension of the the holiday weekend, and in many parts of the world, it is! Hong Kong and London are out today, contributing to the distinct lack of volume and volatility in the overnight and early US sessions.
10yr yields traded just over 2.05% as things wound down on Friday and now trade just over 2.04% to begin this week, in only slightly higher volume. Fannie 3.5 MBS are holding anywhere from 1-3 ticks better than Friday's latest levels, currently up 3 ticks at 103-19.
There were no meaningful drivers of trade in the overnight session and indeed none on the calendar for the rest of the trading day. Bernanke speaks at 7:15pm on the topic of Financial Stability. If this has any impact, it would technically be an event for tomorrow's trading session.
All bond markets can really do today is watch each other and perhaps equities. "Watching each other" means that bond markets can be influenced by cues from larger blocks of trades. If such trading happens to take yields/prices past certain technical levels, such an occurrence could also be a cue to continue that momentum. The lighter volume would mean less opposition to such moves.
The shortest term technical levels in 10yr yields are 2.042 and 2.028. If things move outside that range, and do so "with feeling," we'll assess from there. Fannie 3.5's analogous range would be 103-18 to 103-21. Activity is fairly limited here as well owing to the impending Class A Settlement (Fannie and Freddie 30yr Fixed MBS with April coupons will be retired and May coupons will become the new "front month," creating the illusion of an abrupt drop in prices tomorrow afternoon.
10yr yields traded just over 2.05% as things wound down on Friday and now trade just over 2.04% to begin this week, in only slightly higher volume. Fannie 3.5 MBS are holding anywhere from 1-3 ticks better than Friday's latest levels, currently up 3 ticks at 103-19.
There were no meaningful drivers of trade in the overnight session and indeed none on the calendar for the rest of the trading day. Bernanke speaks at 7:15pm on the topic of Financial Stability. If this has any impact, it would technically be an event for tomorrow's trading session.
All bond markets can really do today is watch each other and perhaps equities. "Watching each other" means that bond markets can be influenced by cues from larger blocks of trades. If such trading happens to take yields/prices past certain technical levels, such an occurrence could also be a cue to continue that momentum. The lighter volume would mean less opposition to such moves.
The shortest term technical levels in 10yr yields are 2.042 and 2.028. If things move outside that range, and do so "with feeling," we'll assess from there. Fannie 3.5's analogous range would be 103-18 to 103-21. Activity is fairly limited here as well owing to the impending Class A Settlement (Fannie and Freddie 30yr Fixed MBS with April coupons will be retired and May coupons will become the new "front month," creating the illusion of an abrupt drop in prices tomorrow afternoon.
8:40AM :
ECON: Chicago Midwest Manufacturing Output Increased in Feb
"The Chicago Fed Midwest Manufacturing Index (CFMMI) increased 1.0% in February, to a seasonally adjusted level of 91.7 (2007 = 100). Revised data show the index was up 2.1% in January. The Federal Reserve Board’s industrial production index for manufacturing (IPMFG) increased 0.4% in February. Regional output in February rose 10.1% from a year earlier, and national output increased 5.4 %."
Not normally a major market mover and today's is no exception.
Not normally a major market mover and today's is no exception.
Live Chat Featured Comments
A recap of the featured comments from the MBS Live dashboard's Live Chat feature, utilized by hundreds of industry professionals each day.
Matthew Graham : "this doesn't change the prices, but because we're constantly charting the most current delivery coupon, when one settles and we move to the next, it makes it look like prices dropped"
Matthew Graham : ""switching from watching April coupons to May's""
Matthew Graham : "if you want to skip all that Trey, main reason it's an illusion is that there is no drop in prices of a particular security. We're merely replacing an old representative MBS coupon with a newer, younger one."
Matthew Graham : "http://mbslive.mortgagenewsdaily.com/knowledgebase/articles/21629-why-do-mbs-prices-seemingly-drop-on-notification-d"
Geoff Allison : "TB see learn tab for notification day"
Trey Beathard : "more specifically, why would an abrupt drop in prices be an "illusion"? "
Trey Beathard : "can anyone expand on this - "Activity is fairly limited here as well owing to the impending Class A Settlement (Fannie and Freddie 30yr Fixed MBS with April coupons will be retired and May coupons will become the new "front month," creating the illusion of an abrupt drop in prices tomorrow afternoon.""
Matthew Graham : "It's also potentially useful to consider that in several of his speeches over the past two weeks, he came off as relatively dovish regarding the possibility of QE3, but it was the FOMC Minutes themselves that garnered the biggest response. At this point, unless he seemingly lets the proverbial cat out of the bag, it doesn't FEEL like there's a lot he could say that would surprise markets in terms of his dovish stance. "
Matthew Graham : "Trey, it's going to be hard for him to say anything that he hasn't already said in the last few weeks. He always has market-moving potential though. In this case, it would be for tomorrow's trading day."
Trey Beathard : "Ben B. is speaking in Atlanta tonight..anybody expect any volatility from his talk or is there no way of knowing?"
Matthew Graham : "this week? it would be a more interesting bet if it was for 1 day IMO. Entirely possible, but don't rule out the "fade" from the standpoint that worsening data brings QE3 back into some level of focus. And stocks like QE3."
Andrew Russell : "I bet lunch a day this week we lose 3% or more, over under at 3%"
Andrew Russell : "MG, you dont think we see a 3% drop in the DOW?"
Andrew Russell : "How is it going to look when the stocks open?"
Read what our user's have to say about MBS Live on LinkedIn.
» Start a two week free trial of MBS Live.
MBS Market Alerts
