HAPPY FRIDAY THE 13th

Recap of Yesterday

  • Jobless Claims 502,000 vs. previous 514,000. 4 week moving average down to 519,750 from 524,250
  • Treasury's Monthly Budget.: $176.4 billion deficit. Bigger hole than expected. Reciepts - 17.9%
  • FHA Audit reveals FHA reserves at all time low. READ  MORE
  • Fed MBS Purchase Program Update: NY Fed buys net $13.5 billion Agency MBS.  Slowing pace of purchase program offset by lack of new loan production. READ MORE

Although several headlines hit the wires, most of the day's meaningful drama developed around the 30 year bond auction. Treasury auctioned $16 billion long bonds at high yield of 4.469%. Demand was relatively weak, bid to cover ratio registered at 2.26. Following the 1pm release of auction results, 10yr TSY yields rose rapidly and "rate sheet influential" MBS coupons prices plummeted.  After being down as low as 100-30, the FN 4.5 went out the door +0-12 at 101-16 yielding 4.317% while the FN 4.0 ended the day +0-11 at 98-29 yielding 4.115%.  The secondary market current coupon is 4.206%.

The chopatility brought out a few reprices for the worse, however as both benchmark rates and production MBS coupons recovered their intraday losses after the auction...several lenders ended up repricing for the better.

Matt talks techs. AQ  discusses trade tactics

(that doesnt count as me talking in 3rd person...haha)

So Far Today

  • SHANGHAI +0.46%, HANG SENG +0.7%, TOPIX -0.1%, NIKKEI -0.35%, CAC -0.34%, DAX -0.08%, FTSE +0.17%
  • US Trade Deficit widens up more than expected.  +18% to $36.47 billion from previous $30.85 deficit

After the data release the dollar weakened, oil prices fell $0.60, gold cheaped up $4.00, and stock futures barely budged...

In the rates market, the yield curve is bull flattening as the 2yr note is trading -0-01 at 0.826% and the 10yr is +0-03 at 3.433%.  2s/10s currently at 260bps.....well off yesterday's high of 267bps.

Here is the 10yr note....

 In the mortgage market, the FN 4.0 is +0-03 at 99 "the buck" and the FN 4.5 is +0-02 at 101-18. Should be interesting to see if MBS buyers continue to look for any sign of weakness to buy. Yield spreads continue to rachet tighter...what are we heading towards.

 Rate sheets should be marginally improved this morning. . Consumer Sentiment at 10AM

 

ON MY PANDORA: The Doors, Soul Kitchen