After another treasury auction that failed to phase the fixed income market, it's simply business as usual, with no major suggestion of directionality until tomorrow's auction. Exactly as discussed this AM, a "ho-hum" auction wasn't likely to accelerate the rally or squash it, but rather to vote for it's relatively linear continuation into the tomorrow's auction.
The only way to cast the rally in a negative light (well, maybe not THE only way) would be to call attention to the widening range between the boundaries of the uptrend... But given the "waiting for shoes to drop" mentality that saw the range narrow before Tuesday's auction, it's not surprising to see a bit of a wider spread between the high and low limits at any given moment in time. However you slice it, the movements have been highly technical. (we're going to revisit the parallel range from this AM in the Closing Commentary tonight, and how it informed profit taking...)
Tsy's, of course are a beneficiary of the rally and the flavor of the morning was a flatter yield curve, that has since dialed back into the afternoon, but imrpoved prices in the long end nonetheless with the 10yr up 12 ticks. That's good a for a drop in yield to 3.405. MBS are up 13 ticks to 101-04...
Perhaps more interesting than these relatively linear rallies is the technical saga playing out in the S&P. Even as I was applying these lines to the chart below, a similar chart came up on CNBC... Not sure how they hacked my computer, but if anyone hears anything, let me know....
But seriously folks... The long and medium term uptrends in the S&P are well-known and well-discussed. And there's some big news today regarding the longest uptrend, drawn off the higher lows from the multi-year low to the march low... We've only touched it twice, and never broken through, until today...
There's some additional attention paid to more medium term "secondary support levels" You can see that each time secondary support is broken, it moves down to the next level of support (usually implied by extending a line drawn from the "higher lows") until it finally reach March's lows. This bottom, connected to the absolute lows is the foundation of the trend that was broken today. Not only that, but we're basically right on the doorstep of some very pertinent technical support. So tomorrow's auction and other data is HUGE as we'll either get a bounce or a violation. Exciting Times!
By The Numbers:
- MBS CC below 4.3! Now: 4.288
- Spreads TIGHTER into the rally (uncommon), ratcheting to 87bps
MBS Market Alerts
