Whoa! Jobs report sucked me in for a while...here is an update while I finish up indepth commentary on labor market...
This morning MBS has been drastically outperformed by TSYs as the oversold 10 yr note recovers from its recent run to the moon (could be short covering). In the past four hours the 10yr note yield has fallen from 3.38 to 3.26...and is currently up 18/32 in price.
Conflicting fundamentals leaving you scratching your head? Recent uncertainty has forced investors to base their trading decisions on technical indicators (previous price behavior). These strategies have left market watchers perplexed at the lack of logical reactions to headline news. Now that some of the headline news risk is behind us, market participants are realigning their models, resetting their entry/exit points, and adjusting their positions. So although some investors may be basing their trading decision on long term convictions, most are making adjustments based on short term technical perspectives (SO THEY CAN TAKE PROFITS!!!)
For MBS...as we have drilled into your brains all month, when rate sheet influential MBS coupons have cheapened, as they did this morning (wider spreads = better deal) the Fed has returned to the market to help return stability. Well this has indeed been the case today. Early in the session MBS/TSY yield spreads widen up, at their morning wides the Fed starting buying to return liquidity to the marketplace. In terms of non-Fed market participants, they continue to employ "up in coupon strategies and have been seen buying 5.0s and 5.5s (doing coupon swaps).
Translation: after a horrible horrible day yesterday, MBS are recovering some of their losses. Lenders may be setting up for "reprices for the better" but remain at the ready because those short term trading technicals that helped us recover this AM could easily reverse our fortunes as PROFIT TAKERS emerge. Stay tuned for alerts...GOOD OR BAD!!!
Since 5pm "Going Out" Marks....
FN30________________________________
FN 4.0 -------->>>> +0-06 to 99-25 from 99-19
FN 4.5 -------->>>> +0-05 to 101-21 from 101-16
FN 5.0 -------->>>> +0-03 to 102-22 from 102-19
FN 5.5 -------->>>> +0-01 to 103-15 from 103-14
FN 6.0 -------->>>> +0-01 to 104-21 from 104-20
GN30________________________________
GN 4.0 -------->>>> +0-05 to 99-26 from 99-21
GN 4.5 -------->>>> +0-04 to 101-28 from 101-24
GN 5.0 -------->>>> +0-02 to 103-10 from 103-08
GN 5.5 -------->>>> +0-01 to 103-27 from 103-26
GN 6.0 -------->>>> +0-00 to 104-14 from 104-14
UST10YR: 3.2689%
2s/10s: 228.96 bps
DOW : +131 to 8541