It's a Trader's World, We're Just Living In It
It's a Trader's World, We're Just Living In It!
It's a Trader's World, We're Just Living In It!!
It's a Trader's World, We're Just Living In It!!!
It's a Trader's World, We're Just Living In It!!!!
For most of the week, as stocks moved stubbornly sideways, benchmark yields bounced around a wide range. But for some reason...TSYs and MBS seemingly found their way back to status quo. Bargain buyers moderated yields from falling further while profit takers werent willing to let prices break resistance without TAKING PROFITS first. Its been a "WAITING FOR GUIDANCE" type week. Volatile.Frustrating.
Today, early on it appeared the guidance we'd been waiting for had finally come....it seemed like TSYs and MBS were in trouble as equities broke out of their recent range, ignoring all kinds of overbought/ momentum indicators (VWAP tells story) ....making new highs for 2009.
Yet...TSYs and MBS returned to status quo.
Lets check out the "range boundness". After a weak 2 yr note auction and a crappy 5 yr note auction pushed the 10yr note up to 3.72...the 10 yr TSY yield fell back towards 3.6 after investors showed increased demand for longer duration debt.
When looking at prices instead of yield...the SEPT 10 yr TSY Futures contract bounced at recent lows and, once again, retested the 23% retracement level.
Which has occurred repeatedly this week as stocks refused to give into the shorts. Yet...TSYs remained strong....returning to status quo.
....and because we have been playing follow the leader with benchmark big brothers...the "rate sheet influential" FN 4.5 current coupon title belt holder...RETURNED TO STATUS QUO TOO
....RIGHT AFTER THE MARKET SHOWED STRONG DEMAND FOR LONGER DURATION DEBT!!!
My point.
The market didnt show much appetite for the short end of the yield curve this week. But it didnt seem to mind the long end. To illustrate...
Check out how much the 2s/10s curve has flattened this week.
The market knew what it was doing. This goes all the way back to the TSY auction announcement last week. Remember? The TSY department announced they would offer up more 2 yr notes than the market was expecting? Right at that time...flattener positions were put in. Remember the NOTES OVER BONDS blog post?
Well...this week those positions played out as the market indicated it was unhappy with that surplus of short dated supply. The long end of the curve drastically outperformed the short end of the curve....THE YIELD CURVE FLATTENED. Remember the NOTES OVER BONDS blog post? :-D
Although only status quo has been kept...STATUS QUO HAS BEEN KEPT!!!! All while stocks made new 2009 highs. Benchmark big brother TSYs and "rate sheet influential" MBS have weathered the supply storm. Now....we are set up to rally....but still waiting for guidance from the stubborn stock market. Still waiting for latecomers to catch the rally so the shorts can take over.
FRUSTRATING TIMES!
Keep telling yourself...
It's a Trader's World, We're Just Living In It
It's a Trader's World, We're Just Living In It!
It's a Trader's World, We're Just Living In It!!
It's a Trader's World, We're Just Living In It!!!
It's a Trader's World, We're Just Living In It!!!!
MBS Market Alerts
