MBSonMND: MBS MID-DAY
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| Pricing as of 11:07 AM EST | ||||||||||||||
Market Updates
11:04AM : ALERT: Positional Support Breaks Down. Reprices Possible
The 10 year note has broken through a cluster of positional support between 3.40% and 3.42% on what appears to be an uptick in short selling. This had led MBS prices even lower which may result in preemptive reprices for the worse. BEWARE. 3.50% is the most logical target in 10s which would push FNCL 4.5 prices below 102-00 again.
10:24AM :
3.42 Band Of Yields Support Is Holding Up Well So Far
The case is not necessarily closed, but so far this support zone has held up admirably with a few bounces off the the high side closer to 3.43 and plenty of recent bounces before reaching 3.42. Sitting at 3.4184 currently
9:58AM :
ISM NON-MANUFACTURING BUSINESS ACTIVITY INDEX 63.5 IN DECEMBER (CONSENSUS 57.5) VS 57.0 IN NOV
Source: Reuters
9:58AM :
ALERT:
ISM REPORT ON U.S. NON-MANUFACTURING SECTOR SHOWS PMI AT 57.1 IN DECEMBER (CONSENSUS 55.6) VS 55.0 NOV
Source: Reuters
9:54AM :
Putting "High Volume" In Context
On the chance that referring to volume as "really really big" is not specific enough for you, here's some specificity.
For the hour ending at 9am, yesterday's volume in 10yr futures was 98,902 contracts. That same time period today saw 356,105 contracts traded.
9:38AM :
Additional thoughts on technical levels in treasuries
3.4289 is a line that first emerged as a pivot on 12/29. It rests on the high side of a BAND OF YIELDS that comprises the overall pivot zone with 3.42 on the low end. Yields in between these levels are inconclusive, below is positive, and above is worrisome. So far this morning we have a perfect bounce off 3.4287, and another one minutes later. Now yields have returned under 3.42. The whole affair constitutes a 1-0 record versus this support zone, and so far, that's all we know until/unless yields cross 3.42 again. I think the fact that ridiculously immense volume surrounds this successful show of support is significant.
9:31AM :
Highly Technical Movements Abound - Suggesting A Shift In Pre-NFP Psychology
Wow! What a morning! Saw HUGE volume dumping bonds after ADP. This is a clear-cut case of the markets making an adjustment to the NFP consensus through trading levels. So far, the adjustment has been technically superb especially in 10's and 10yr futures. But MBS are also doing a fairly good job holding recent pivot-based support. 3.4289 IS THE MAGIC LINE in 10yr notes. Not the end of the world if we cross it, but significant.
8:44AM :
DATA FLASH: MBA Apps
For the week ending 12/31 the seasonally adjusted market index was up 2.3% to 472.1. The purchase index fell .8% to 199.8 while the refinance index rose 3.9% to 2115.4. For perspective, it had been in the 3800 every week from July through Mid November.
8:25AM :
ALERT:
Post ADP Treasury Flows: Sell Tickets Galore
Trading flows went sharply negative as ADP Employment Data flashed across screens. This is indicative of not only profit taking but liquidative selling ahead of NFP. We would not be surprised to see frontrunners push 10s as far as 3.50% into Friday morning data as a result of much better than expected ADP data.
8:14AM :
DATA FLASH: ADP DEC PRIVATE SECTOR JOBS +297,000 vs. EXPECTED +100,000
Private-sector employment increased by 297,000 from November to December on a seasonally adjusted basis, according to the latest ADP National Employment Report® released today. The estimated change of employment from October to November was revised down, but only slightly, from the previously reported increase of 93,000 to an increase of 92,000. This month’s ADP National Employment Report suggests nonfarm private employment grew very strongly in December, at a pace well above what is usually associated with a declining unemployment rate.
8:11AM :
DATA FLASH: Planned Layoffs Fall 34% in November
Planned layoffs totaled 32,004 in December, down 34 percent from 48,711 in November, according to the 2010 year-end job-cut report released Wednesday by global outplacement consultancy Challenger, Gray & Christmas, Inc. December job cuts were 29 percent lower than the same month a year ago when 45,094 cuts were announced.
Featured Market Discussion
Matthew Graham : "the amount of info changing hands right now is eye-watering"
Glenn Setzer : "we are going to add a newsticker to the dashboard for all though"
Glenn Setzer : "scott, mbs comm and rate watch will update to the left - in the menu."
Matthew Graham : "profit taking and short covering = closing a previously opened position"
Victor Burek : "adp is only private payrolls no govt hiring or firing"
Scott Valins : "when on the dashboard page, is there a way to determine if there are new postings up in Rate Watch, Commentary, Pipeline press, etc?"
Thomas Quann : "MG--- Difference between Non Farms and ADP??? What the difference, Investorpedia not clear on difference,"
Matthew Graham : "since this AM's losses are not "established" but rather more like an abrupt "sell off" I'd be more interested in considering this in the context of simple "support level""
Matthew Graham : "first of all, very good job in noticing the pattern, and as far as the "shape" of trading it is indeed a flag. But generally speaking a flag comes during an established directional movement"
Michael Kelleher : "i never got that in all the reading i have been doing over the last couple months, this new feature kicks ass in that you can ask these questions"
Michael Kelleher : "matt when you say profit takers or covering their short does that mean they are repositioning a short and are they executing their current short "
Joe Ridings : "Matt is the 10yr forming a flag"
Matthew Graham : "although the volume has come and gone (relative to earlier volume)"
Corey Sacken : "cool. feels good to get a decent deal. if I wanted the best I would have waited longer. happy just to be done with it"
Matthew Graham : "10 bp sell offs from well established range boundaries to the other side are barely as alarming as my morning coffee"
Gus Floropoulos : "as a matter of fact, its probably bc of the moves weve had since QE2 that today adp # hasnt pushed the 10 yr even higher, may be baked in already"
Brett Boyke : "AQ - props to you on the vol call, may I kiss the pinkie ring?"
Brayden Alexander : "we moved 10bp is 5 minutes this morning"
Matthew Graham : "and I mean "prepared" in the sense of "capabale of" "
Brett Boyke : "still feel like we are getting set up here for slaughter, market is looking for a reason to pile onto the risk bandwagon"
Matthew Graham : "3.0, you're talking about a 40bp move in 2 trading days. You think this market is prepared to rally that hard?"
Victor Burek : "all in all, MBS doing very well"
Victor Burek : "if you were told last week that the 10 year would be at 3.41, ADP showed 3x more jobs and the 4.5 coupon was at 102-10...would you take it"
Gus Floropoulos : "not that im the pro, bsut just based on the momentum of thing"
Gus Floropoulos : "id like to believe that a bad nfp # can get us to test 3, but feels unlikely that the # will be that bad"
Brett Boyke : "here is the pricing summary to open - Flag -.372, BBT -.417, Chase -.24, Wells -.308, GMAC -.708, US -.372"
Adam Quinones : "over the last six months the ADP report has understated official private payroll growth (ESR) by an average of 55,000 heads. That implies the private payrolls number in the official ESR data should register a read near +350,000 which is WAY ABOVE current calls for +145,000."
Brett Boyke : "read something recently about TSY market being the new day trading market due to all the volatility, they must be loving days like today"
Matthew Graham : "So while a big shocker of a bullish ADP does increase the risk that NFP will also be bullish, it's not an outright guarantee"
Matthew Graham : "In other words, the moving averages line up better than the individual data points themselves"
Matthew Graham : "the positive correlation of ADP and NFP is much more reliable in the long run, but can vary greatly month to month"
Victor Burek : "Planned layoffs totaled 32,004 in December, down 34 percent from
48,711 in November, according to the 2010 year-end job-cut report released
Wednesday by global outplacement consultancy Challenger, Gray &
Christmas, Inc. December job cuts were 29 percent lower than the same
month a year ago when 45,094 cuts were announced.
December surpassed August (34,768) as the lowest job-cut month of
the year."
MBS Market Alerts
