Good Morning. Let's get this overwith...
I am a hockey fan, specifically a Washington Capitals fan. Last night the Caps, who were considered to be the best team in the NHL based on points in the REGULAR SEASON, were ousted in round 1 of the Stanley Cup playoffs. I am stunned, dejected, deflated, disappointed, and downright depressed about it. This must be what it feels like to be a San Jose fan. It is what it is....life goes on. Good luck to the Canadians in round 2 against the Pens.
On the bright side...KFC is offering a new sandwich. The bread is two fried chicken patties and the meat is bacon. I want to get one, take it home, and put it on a bun. HAHA...only in America. CHECK IT OUT
Jobless Claims data has been released. Initial claims were close to consensus while continued claims were higher than forecast.
From the release...
INITIAL JOBLESS CLAIMS: In the week ending April 24, the advance figure for seasonally adjusted initial claims was 448,000, a decrease of 11,000 from the previous week's revised figure of 459,000. The 4-week moving average was 462,500, an increase of 1,500 from the previous week's revised average of 461,000.
The advance number of actual initial claims under state programs, unadjusted, totaled 423,286 in the week ending April 24, a decrease of 11,171 from the previous week. There were 583,457 initial claims in the comparable week in 2009.
The largest increases in initial claims for the week ending April 17 were in Puerto Rico (+3,549), Iowa (+1,606), Georgia (+1,412), Connecticut (+768), and Florida (+422), while the largest decreases were in New York (-21,010), California (-15,380), Pennsylvania (-4,512), Oregon (-4,317), and New Jersey (-3,777).
CONTINUED CLAIMS: The advance number for seasonally adjusted insured unemployment during the week ending April 17 was 4,645,000, a decrease of 18,000 from the preceding week's revised level of 4,663,000. The 4-week moving average was 4,639,000, a decrease of 9,000 from the preceding week's revised average of 4,648,000.
EMERGENCY BENEFITS: States reported 5,200,473 persons claiming EUC (Emergency Unemployment Compensation) benefits for the week ending April 10, a decrease of 146,641 from the prior week. There were 2,286,186 claimants in the comparable week in 2009.
This jobless claims report will be scrutinized more than the previous report because the data is taken from a week which included the 12th day of the month. This is important because the BLS and Census Bureau generally conduct their surveys for the official Employment Situation Report in the week that contains the 12th day of the month or the pay period including the 12th. If jobless claims do correlate with the payroll count (establishment survey)....this implies the April Employment Report should be strong. The same might not be said for the unemployment rate thought (household survey). Expect the unemployment rate to actually move higher as workers re-enter the work force. This is why looking at U-6 is important.
Stocks moved higher after the data and bonds didn't budge.
S&P futures are heading toward a test of the all-important 1200 pivot point, currently bid +7.75 at 1197.
The 3.625% coupon bearing 10 year TSY note is -0-02 at 98-25 yielding 3.775%. Benchmark 10s are running into trend line resistance. This barrier was acting as resistance on Monday morning before S&P downgraded Greece to junk and a flight to safey poured into the TSY market....we are now back to square one. The same thing goes for the shape of the 2s/10s curve....currently back to 275bps. READ MORE
Rate sheet influential MBS coupon prices are flat. The FN 4.5 is +0-01 at 100-15 yielding 4.451%. The secondary market current coupon, the yield lenders use to determine mortgage rates before servicing and g-fees, is essentially unchanged on the day at 4.437%. While prices are flat, production MBS coupon relative value vs. TSYs is improving. Yield spread tightening started to pick up steam after the FOMC statement was released yesterday and has carried over into today's session.
Trading flows were busy in the MBS market yesterday. Roughly $3bn in new loan supply from originators was offerred to the street as secondary deparments locked in at the rate sheet rebate highs (MBS price highs/CC yield lows). That should just about wipe out pipelines until the next dip in secondary market current coupon yields. Loan supply and trading flows have been slow today with less than $1bn in originator sales and a meager 3-4k trades according to TradeWeb.
BoA is slightly better, Wells is slightly better, Chase is slightly worse, Citi is better, GMAC is better
REPRICES FOR THE BETTER AROUND 100-23
REPRICES FOR THE WORSE AROUND 100-09
There is a ton of noise surrounding the marketplace at the moment, and it's coming mostly out of the EU. I don't see the trading environment acting any different than it has over the past year though. BIG PICTURE perspectives are clouded by assumptions based on assumptions and aggregate demand is still heavily subsidized by global governments and central banks. Sentiment is still shifting more toward confirmed stabilization and recuperation though. The worst case scenario seems avoided and most believe a bottom has been put in place. This leaves main street at the mercy of professional market participants who can't let their P&L sit idle while the world proves its worth.
I am watching the stock lever for a sign of things to come in the next few days, if the S&P ticks over and holds above 1200...10s are due another test of 3.85% (bad for mortgage rates). This of course assumes TAPEBOMBS are kept to a minimum. What do you think about the chances of another tapebomb hitting newswires? The good news is...if TSYs do sell, mortgage rates won't rise as much as benchmark yields.
It's a traders world and we're living in it.
Today we must get past $32 billion 7-year notes. This is the most MBS influential maturity offered in this auction cycle, so we could see a bit more post-auction volatility depending on the outcome.
Play the range until