MBS Pricing Snapshot

The pocket translator for trade-speak might characterize this morning as "fading the Durables print," where "fade" means to take up a counterintuitive position to that suggested by data or events among other things. That is to say, the data was stronger than expected, which traditionally implies negative price pressure on bond markets, and we're instead seeing a rally.

It's not just bond markets though. Equities are making the equivalent move with S&P futures off about 8 points from their post-data highs. For their part, MBS opened a few ticks into positive territory, weakened briefly on the initial data print and bounced in the other direction with everyone else, now 5 ticks higher on the day at 101-27.

Whether or not the positive momentum is sustainable into the early 2pm close remains to be seen, but simply holding ground above 101-16 is all we'd really need to keep hope alive for a bigger-picture supportive bounce next week.

From a tactical standpoint, the high 1.99's and low 2.00's in 10yr yields have been a key battleground over the past two days, coming into play as an ultra high volume pivot point yesterday and serving as a tough resistance floor to an overnight rally. At 1.998 moments ago, we were at the best levels of the night, but the biggest bounce yesterday was all the way down at 1.988 (feels like a very long distance for a single basis point).

There's no additional scheduled data today, and again, we close early for a 3-day weekend. Japan will be trading on Monday whereas we will not, and this could add some relative defensiveness into any intention to rally meaningfully past the aforementioned inflection point at 1.988. We'll cross that bridge (or not) when we come to it though, and for now, 10's have already shied away, back to 2.007 currently.

On a final note, it is a "quadruple witching" session, meaning that all open positions in single stock and stock index futures and options will have to be closed or rolled. This can be nothing more than a silly phrase to impress your friends over the holiday weekend ("sorry I'm late to the cookout guys/gals... You know how it is, what with Quadruple Witching and all...") or it can be cause of inexplicably motivated volatility. So far so good on that note, but things probably won't die down meaningfully until lunch time in New York, which tends to be like the Bermuda triangle on early close Friday's ahead of 3 day weekends.

- Headline +3.3 vs +1.5 forecast, -5.9 previously
- Ex Transportation +1.3 vs +0.5 forecast
- Nondefense orders, excluding aircraft +1.2 vs +0.5 forecast

Market Reaction: So far so good with bond markets bouncing back after an initial obligatory blip to the downside. Back in line with 8:30am levels now.

New orders for manufactured durable goods in April increased $7.2 billion or 3.3 percent to $222.6 billion, the U.S. Census Bureau announced today. This increase, up two of the last three months, followed a 5.9 percent March decrease. Excluding transportation, new orders increased 1.3 percent. Excluding defense, new orders increased 2.1 percent.

Transportation equipment, also up two of the last three months, led the increase, $5.1 billion or 8.1 percent to $67.6 billion. This was led by nondefense aircraft and parts, which increased $1.9 billion.