Arguments are ongoing for adjusting the current MBS range upward. At the moment, the 4.5 is up 4 ticks to 101-08 and the 10yr tsy is up 4 ticks (in price) as well, bringing the yield down to 3.31. But this latter metric might serve to sober the excitement we might otherwise feel when broaching such topics as "adjusting ranges upward."
Last week, we discussed the concept of validation from the treasury market in the sense that we'd like to see tsy's breaking their salient long term ranges in conjunction with similar MBS feats. But at 3.31, we're still a bit too high, not to mention the bounce that already occurred near the lower levels today which you'll be able to see in the chart.
From a day over day perspective, the stock lever was certainly NOT in effect. However, the day over day dissimilarities are largely attributable to volume as both stocks and bonds are trading at much better levels than VWAP which would have made for a cleaner overlay on the chart above. So if we advance the chart to where the AM bullishness in stocks begins to wear off, things line up much better.
As for the rest of the day, we'll continue to watch 3.3 for ongoing support, but again, we'd hesitate to draw firm conclusions on a low volume, data-free day ahead of NFP and other month-end finery. Here's a long term chart so you have a visual on those long term support and resistance levels discussed above. We'll also be going into more detail on the various ranges and "tests" shown on the MBS portion in the closing commentary today.
MBS Market Alerts
