Recap of Yesterday
- Lender rate sheets relatively unchanged in AM...reprices for worse reported in afternoon.
- Mortgage-backs get off to slow start yesterday morning, activity picks up in afternoon as servicers and originators dumped supply of production MBS coupons on market. Fed buying focus on FN 5.5s
- MBS Prices: FN 4.5 -0-06 to 100-16. FN 5.0 -0-07 to 102-25
- MBS Valuation: After a week of yield spread tightening, "rate sheet influential" coupons lost ground to TSYs yesterday yield spreads widened, TSYs outperformed MBS. (thanks to originator and servicer selling).
- MBS Current Coupon: 4.38%
- 10 yr yield reaches intraday low of 3.41% in AM, then rapidly sells off after lunch as stocks tick off lows...10yr yield hits 3.49%..
- Yield curve steeper. Odd event given $112bn in 2s/5s/7s will
be issued this week. (more below)
- Econ Data: Leading Indicators (Aug) +0.6% vs. +0.9% revised July. Jobless Claims were weak spot
- Fed bought $4bn in TSYs maturing between Dec. 2013 and April 2016. Only $11bn left for TSY purchases
So far this AM
- SHANGHAI -2.34%, HANG SENG +1.06%, FTSE +0.84%, CAC +0.78%, DAX +1.2%...Japan closed for holiday
- NY Times reports FDIC may borrow funds from healthy banks to ensure they have adequate capital to support the 94 banks that have failed this year.
- Dollar Index -0.83% at 76.12. Oil +2.83% at 71.68. Gold over $1,000 again....Currently $1,018
- 3 month LIBOR lower again. 0.2856
- Futures market: 10yr contract tight range between 116-27 and 116-31. S&P futures higher overnight.
In light volume, 10s trade between 3.48 and 3.51 overnight. 5 yr notes were most active , 2s least traded. 10s currently -0-07 at 100-31 yielding 3.502...
FN 4.5 currently -0-04 at 100-12+....
The Day Ahead
- Read MND's "The Day Ahead"
- Yield curve steepened yesterday. Would've expected
flattening ahead of auction. Remember that supply is coming from mostly front
end of curve. $43billion 2s at 1pm today
- Implies a few things: 1. Auction concessions were already priced in last week. 2.Traders will either price in concession this morning or in auction
- Japan out on holiday until Thursday. Will this affect auction demand this week?
- Slowdown of MBS trading flows heading into FOMC meeting...MBS prices will pace direction of benchmark TSYs and swaps
- Traders avoiding the wings, trading the belly of the MBS coupon stack (5.0s thru 6.0s)
- 10s at high side of yield range...will range continue to contain? 3.52% is support for 10s.
- Rate sheets expected to be slightly worse
If you need a pick me up...WATCH THIS
MBS Market Alerts
