Tuesday 9/29 at a Glance

  • MBS down 1 tick on the day to 101-11, continuing to close at multi-month highs
  • Real Money (insurance funds, etc..) took profits at times, nothing hedge funds and servicer buying couldn't handle. 
  • New production (MBS being sold by originators aka, the loans you've all been locking) moderately healthy over 2 billion.  See it come.  See it go...  right onto the Fed's balance sheet (Fed buying still taking down almost all supply offerings).  What else is new?
  • Tsys similar as 10yr yield backed up modestly moving from 3.27+ last night to 3.291 currently
  • Fed buys $3.55b 2012 Treasuries in open market operations
  • Stocks mostly flat according to S&P, down a point and a half to 1060.61.  Dow a bit more bearish down 47.2 on tech and oil
  • BNP Paripas, largest Franc Bank to raise capital to get out from under the TARP.  Stock up overnight.  Lost about half the gain in heavy, late volume.
  • DATA: Case Shiller HPI +1.6% m/m (prev: +1.4%, consensus: +0.5%) -13.3% y/y; 18/20 metro areas improved in July.  Yields moved higher.
  • DATA: Consumer Confidence 53.1 (prev: 54.5, consensus 57.0).  present situation index lowest since March (stock market lows?), Consumer Expectations flat
  • Fed"s Fisher: Fed exit needs to start as soon as economy shows convincing traction; Fed will act in timely way to reverse accommodative policy; Reversal could be equal in speed and intensity to 2007-08 easing; Housing sector may have reached bottom, but "still on life support"; Job market getting "less worse", but still likely to hit 10% on unemployment
  • Fed"s Cumming: Substantial slack putting downward pressure on prices; Recovery likely to be sluggish; US consumption likely will continue to be weak; May not be out of the woods yet in housing
  • Pimco Gross: Buying treasuries to protect against deflation (with a D!), but what does he know...

 

Charts

(limited analysis, but in a few words, share what you're seeing in the comments.  I'll give you a few words of mine on each of them as well)

 

mg's thoughts: not definitive enough of a break below resistance in tsy's.  ended up right on long term trendline, seen in next chart. 

mg says: same thoughts as above...  yesterday's breakout was nice, but today brought us a tick or two back towards inflection.  all that aside, we have NFP, month end, and quarter end on the horizon...  futures still rangebound as can be seen in final chart:

mg: who was executing futures trades this afternoon?  Mr. Roboto?  What software language was used to code the buy/sell tickets?  Binary?  ONE ONE ZERO ZERO ONE ZERO ONE!  lost ya?  sorry...  Just meant to say it's all very mechanical and technical...  I see the shapes on the chart, but I "hear" the market saying: "ok, that print on confidence was enough to get ya back to yesterday's high range, but we ain't going an inch further until we get some more data..."

conclusion: seems that analysts are slightly more bond bullish than not at the moment, and some of that has to do with this rubber-band snap expected to occur after quarter end, as if balance sheets are causing a huge aritificial price weakness in bonds for the next few days.  Maybe it is, maybe it isn't, but at this epic of an inflection point, my argument is that it doesn't matter how much concession is baked in for quarter end.  It would be far overwhelmed by whatever other factors motivate the 10yr yield away from 3.3. 

We saw more fizzle today in bonds, which is perhaps understandable against the backdrop of impending data.  But I was reminded today by one of the most sagacious mentors I have who is well known in the technical analysis world that Market Profile is neither bullish nor bearish on 10yr futures.  So just as we said yesterday that we still don't have enough info to consider the current range to be our new home, after closing within 1 tick on MBS and within 2 bps of yesterday's marks on tsy's, I'd say that, yeah, same story as yesterday.  

Last thought, on a day over day chart, 10yr futures threw out a gnarly "hanging man" today.  If tomorrow is price negative, it would confirm a bearish reversal in textbook fashion.

Day Ahead

  • MBA purchase applications at 7AM ET
  • ADP Jobs report at 815 ET
  • GDP (expected just slightly worse at -1.2%) at 830 ET
  • Chicago Purchasing Managers Index 945 ET
  • Feds Lockhart 1030 ET