Good Afternoon All..
The FN 4.0 is trading +0-15 at 98 "rock" (trader jargon for 98-00. Could also say 98 no level all handle, 98 even, 98 the figure) yielding 4.422% while the FN 4.5 is +0-13 at 100-21 yielding 4.422%. The secondary market current coupon is 4.379%.
Below is a longer term look at the recovery of your beloved FN 4.5 coupon. Notice, after submitting to the gravitational pull of PARNERTIA, prices are back in the range that held through the end of last week....just kinda chillin waiting for more direction from our benchmark big brothers.
The yield curve's corrective momentum paved the way for higher MBS prices and REPRICES FOR THE BETTER from lenders.
TSY trading flows were relatively busy, before and after the auction. Momentum began to accumulate after the S&P/Case Shiller data, buying picked up after Consumer Confidence was worse than expected, and then a little more bid after the 2yr auction when short positions were forced to cover. Volume in TSY futures was decent....263,000 2yr contracts were traded, 482,000 5s, 930,000 10s, and 225,000 30s.
Here is the originator friendly 10yr TSY note trend channel. Weeeeeeeeeeeeeeeeee.....
Into the uptrade, "rate sheet influential" MBS coupon yields were outperformed by Treasury hedges AKA yield spreads are wider.
The MBS current coupon yield is 92.3 basis point higher than the 10yr TSY note and 74.2 basis points over the 10yr swap rate.The FN 4.5 yield is currently 96.6 basis points over the 10yr TSY note yield. This morning, before the rates market rally really took off after the auction, yield spreads were a few basis points tighter, however as rates continued to fall mortgages began to lag. Not to worry though...its normal for "rate sheet influential" MBS coupons to lag their duration benchmarks into a rates rally.
Based on trading volume....about $2 billion in new production TBA MBS supply was made available for bid today.
Stocks have failed to make much progress in either direction today. Equity-siders would likely point to the fresh recovery of the dollar and cheaper commodity prices as a reason for weakness in stocks. While we are paying attention to the stock lever we are not so much attached to its indicative push/pull powers over the bond market. More than anything the bond market has been leading stocks! Odd...bonds reflect an uncertain economic outlook while stocks havent stopped rallying since March. (please note sarcasm).
To reiterate what we said this morning...there was nothing to stop out selling yesterday. So traders said : Hmmmm this is good opportunity to get a few extra bps in return from the TSY department. That "floorless" sell off corrected today....welcome back to the range for now. Before we are willing to confirm the range breakdown was nothing more than a "BLIP" though....lets get through the week without re-testing the 3.50% again. In the near term I would really like to see the 10yr head out the door at or under 3.45% ...
WERE YOU ON THE NAMB WEBINAR? FEEDBACK REQUESTED!
PS...TIIIMMMMAAAAY Geithner is talking to Charlie Rose at the SIFMA conference in New York. I just heard TIIIMMMAAAAY say that the mortgage market is weak.
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