- 4.5's were up about 8 ticks from 101-09 to 101-17
- New JUNE coupons take center stage now, and closed today at 101-05
- Secondary Market Current Coupon : 4.344%. Yield spreads closed tighter.
- So as far as "the most current MBS coupon" we're only 2 ticks lower in price than where we started the day
- 10yr yields inched 1bp lower and ended at 3.531%
- Stocks lost a bit with the S&P down 3.94 to 1155.79. You'll see the S&P charts in a moment. They're not bullish
- 10yr TSY Auction Outlook
First, if you did not read AQ's post describing the MBS Settlement Process: HERE IT IS. It is a must read as it also explains why 30 day locks are cheaper than 60.
So the EU announced their bailout a few days ago and everything magically unwinds?
It does seem that even those who see low interest rates prevailing (or even getting a bit lower) in the medium term, are still expecting some weakness in the short term. But we didn't really see that weakness today. Yields did what they are expected to do and built in a bit of a concession before the auction and rallied back firmly in line with Monday's levels. One down... Next batter... tomorrow at 1pm = 10yr auction.
As MBS are still sort of in the midst of making their play against the long term trendline, treasuries seem like they've already changed their course and are now confronted by one of any number of potential support levels (especially the teal and green lines in the lower portion of the following chart).
The teal line is a pretty major pivot point. A hold below the teal line is roughly similar to the 119-00 level in the treasury futures chart below. The fact that the "bounce" seen here has even BEGUN to materialize suggests that markets are open to the possibility of rallying higher on awesome auction results:
Finally, who could forget stocks...?
I'm sure the initial snap-back on the EU bailout news was nice, promising even... But it still doesn't look like a chart of something that is making a convincing correction or a convicted move higher, (yet).
The "yet" can depend on a several factors, but a good start would be knowing the results of tomorrow's 10yr auction at 1pm.