MBS RECAP: winning streak thwarted, but not much
This morning’s day ahead has considered the possibility of a fourth straight day of intraday gains on bonds – something that hasn’t happened since last September. These bullish considerations apparently angered the bondage gods who are a strict and unforgiving crowd. Literally moments later, the bonds turned red and have been red ever since. On the upside, the 10-year returns have been fairly reliably orbiting 1.56% over the past 4 days (in other words, they were flat despite some intraday volatility). This is actually another strong accomplishment considering we have another shortened government bond auction cycle early next week. The interruption of the rising rate of 2021 continues …
Econ data / events
Fed MBS purchase 10 a.m., 11:30 a.m., 1 p.m.
IHS / Markit PMIs:
Composite ……… 62.2 vs 59.7 previously
Services ………… 63.1 vs 61.9 f’cast, 60.4 before
Manufacturing …. 60.6 vs 60.5 f’cast, 59.1 prev
New Home Sales 1,021m vs 886k f’cast, 846k prev
(highest since 2006)
Market Movement Review
Bonds were microscopically weaker in Asia but steadily gaining ground in Europe. The domestic session starts just slightly stronger, with most of the improvements happening at the CME Open at 8:20 am. 10 years is almost 1 basis point lower at 1.535 and MBS 2.5 coupons are up 1 tick (0.03).
Steady weakness since 9:30 am NYSE open. Stronger PMI and New Home Sales data can actually help. 10 year return now by 3 basis points to 1.572 and 2.5 UMBS by a little more than an eighth.
Decent rebound at 11am as bonds found technical support before breaking above 1.585% (now down 1.56%). On this day (-0.06) at 103-22 (103.69) UMBS only decreased by 2 ticks.
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