Yesterday morning saw bonds weaken enough to cause some small measure of panic among bond bulls. Said bulls had been nodding their heads all last week as they were finally seeing yields that made sense in the context of long-lasting trade wars, tepid economic data, and little incentive on the part of the administration to make any market-saving gestures while stock prices seemed willing to bounce on the simple hope of Fed rate cuts.
The issue was that the trade deal announced between the US and Mexico was in the same vein as a market-saving gesture (i.e. bad for rates/bonds). Granted, it’s nothing on the order of a US/China deal (largely because there wasn’t any major change to the existing US/Mexico deal) but the forbearance of new tariffs was enough to make bonds rethink the rally they enjoyed due to the initial announcement of those tariffs!
It was refreshing, then, to see yields stop short of revisiting “pre-Mexico” trading levels. A strong 3yr auction yesterday and a perfectly reasonable 10yr Treasury auction today both helped to reinforce that bonds can be comfortable trading in reasonable proximity to the long-term lows achieved last week. This morning’s weak inflation data (CPI) didn’t hurt, although it didn’t help in any profound way either.
If anything, the 2 days of resilience builds the sense that bonds are gearing up for the next big move–one that’s likely to take shape after next week’s Fed announcement. If that doesn’t do the trick the first week of data in July likely will.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
100-10 : +0-06
2.1200 : -0.0200
|Pricing as of 6/12/19 4:27PMEST|
MBS Live Chat Highlights
Matthew Graham : “people wanna complain about it, but wtf…. you’re asking someone to give you a crapload of money. If you think about it, what you have to do in order to get it is a lot less than I’d make you do if it were my money.”
Jason Anker : “MG was spot on”
Caroline Roy : “MG, loved your last word. “if you listen to what your LO tells you that you need to do, its not that bad”. Boom!”
Matthew Graham : “it could be. subjective decision. I personally feel that the weekend tape-bomb (no mexico tariffs) re-set the resistance floor around 2.12. I don’t see a competing, upwardly sloped resistance trend so much as a few horizontal levels–especially when we look at the past 2 weeks as opposed to 5 days.”
Timothy Baron : “Just curious, why isn’t the lower red line down under the lows of 7 June?”
Matthew Graham : “added to the dashboard for ya, TB”
Timothy Baron : “Quite the triangle on the 10 yr 5 day chart.”
Brian Bockholdt : “Nice job MG – Gezz she was sure slamming the mortgage process!!”
Riley Hayes : “MG – the Carnac the Magnificent of mortgage rates”
Vince Boryla : “Great Job MG”
Matthew Graham : “They didn’t even ask me to predict rates!”
Matthew Graham : “looks like a solid B+. getting ready to go on TV. keep it green”
Matthew Graham : “RTRS – PRIMARY DEALERS TAKE 20.82 PCT OF U.S. 9-YEAR 11-MONTH NOTES SALE, DIRECT 13.61 PCT AND INDIRECT 65.57 PCT”
Matthew Graham : “RTRS – HIGH YIELD AT LATEST 9-YR 11-MO NOTE SALE WAS LESS THAN 1 BASIS POINT BELOW ITS 1 P.M. WHEN-ISSUED LEVEL – REUTERS DATA”
Matthew Graham : “RTRS – U.S. 9-YR 11-MO NOTES BID-TO-COVER RATIO 2.49, NON-COMP BIDS $9.94 MLN”
Matthew Graham : “RTRS – U.S. SELLS $24 BLN 9-YR 11-MO NOTES AT HIGH YIELD 2.130 PCT, AWARDS 93.68 PCT OF BIDS AT HIGH”
John Tassios : “MG, Any news on 10 yr auction?”
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