The White House today responded to recent questions raised, among other places, by an article in today's Washington Post, about the potential phasing-out, combination, or replacement of Fannie Mae and Freddie Mac by saying that "the story out today is light years ahead of any decision making process here." Although this is not impacting MBS trading at the moment, the sensationalism deserves to be put in check.
As far as reality goes today, unencumbered by click-hungry contrivance, not much is going on save for the various analyses on just what jobless claims mean to the economy and how they might correlate with tomorrow's NFP. Trading has been range-bound in 4.5's between 99-12 and 99-03 with the later emerging as the today's clear choice for a support level...
Stocks have bounced twice at 995-996 and look to be heading back in that direction a third time. This is likely to pull tsy's down a bit, which have had decent but not "lock step" correlation with equities today. Moving a bit higher on the correlation level would be tsy's and MBS on the day with a sideways and guidance-seeking sector taking cues wherever they're given... So MBS are safe for now with upside the bigger potential than downside in the short term.
But again, none of this matters... It would be a big surprise indeed to see any of these markets move meaningfully out of today's established ranges, although for stocks, I'd propbably be more excited about breaking yesterday's lows around 994 since that's a much more realistic possibility than tsy's or MBS getting back to their best levels yesterday, 3.64 and 99-28 respectively. Why don't we care? In a two words: NFP tomorrow... It's a bigger and more important data set in actuality, but even moreso in perception.
Bottom line: those ascribing to the 2 point range in 4.5's from 99 to 101 would be obvious floaters still, and nothing about current trading threatens short term reprices for the worse. The only thing to be concerned about would be a reasonable movement below 99-00 today. But short of going out on a limb and saying it ain't gonna happen, well, it ain't gonna happen.. As we said yesterday, it's more likely that MBS is at the bottom of it's recent range than the top, and we'd have to stick with that assumption until some undisclosed force is actually able to pull the 4.5 below 99 more than a few ticks for more than a few days...
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