This will be brief...
RANGE BOUND RANGE BOUND RANGE BOUND!!!!!
HAHA..its somewhat comical at this point. Over the past month, "the range" has kept 10yr yields bouncing back and forth between 3.37 and 3.50...and more recently 3.44 and 3.50. Its been almost too easy...so easy it makes nervous about too many market participants playing along. Nonetheless the RANGE has been the major theme in the rates market over the past few months (summer) and we cant ignore it (the range is the range until the range is no more!!!)
Here is a little triange action on the 10yr....3.50 has held strong so far. We do not want to see a breakout over 3.52%...
This chopatility has resulted in lots of ups and downs in "rate sheet influential" MBS prices. The FN 4.5 has traded as low as 100-11 and as high as 100-18....currently -0-04 at 100-15.
Dont get price volatility lead you to believe that mortgage trading is busy today. Ahead of the FOMC statement, MBS trading flows are quieter than a moment of silence at a mime's funeral. The chopatility is a function of the directional guidance offered up by our benchmark big brothers.
RATE SHEET REBATES ARE SLIGHTLY WORSE THIS MORNING...but nothing GFE altering.
YIELD CURVE: 2s/5s are 7bps flatter, 2s/10s are 7bps flatter, 2s/30s are 6bps flatter, 5s/10s and 5s/30s unchanged. The curve is flatter! The long end is outperforming the short end. 2s are seeing most volume (rolls)
US Dollar: slightly stronger vs.Euro. Dollar index slighter stronger vs. basket of currencies.
Oil: -$2.95 at 68.81 after government oil inventory data indicated large rise in crude oil stocks. Supply/demand actually matter in commodities trading? Weird.
Gold: modestly lower at 1,009.
Stocks: unchanged for the most part.
The market is in "WAIT AND SEE" mode...TSY AUCTION AT 1PM. FED STATEMENT at 215
re: TSY $40bn 5yr note auction at 1pm. The When Issued 5 yr note is trading at a yield of 2.473%. Yesterday's two year note auction went well...demand for US guaranteed debt has not waned. Flight to safety! The herd is still too nervous to venture into riskier investment sectors...everyone wants to play it safe and earn back lost wealth, slow and steady. (Yes I know stocks have rallied...thank professional traders and institutional buyers for that).
Here is a look at previous 5 yr note auctions..
Anyone think the Fed says anything enlightening on the MBS Purchase Program?
MBS Market Alerts
