The Treasury just sold $16bln of 30-year bonds. The issue tailed the auction deadline quote by 2.5bps stopping at a high yield of 4.72%. Indirects took just a 28.5% portion, while Directs took a whopping 24.1%. The auction had a bid to cover ratio of 2.36 compared to an average cover of 2.54 seen over the last six auctions. The Direct bid was the highest ever, while Indirects, saw their smallest award percentage in a bond auction since November. The Indirect % is important because it’s good to see higher numbers of those foreign central banks buying our debt. Stocks have held their ground still trading up above 100 points, closely listening to more of what is to come from the Greece bailout plan.
For us mortgage types, weakness earlier today have taken prices below the 21-day moving average for the first time in weeks, now set at 117-235. The low of the day is currently near the 38% retracement of the Nov/Feb rally at 117-13. Bulls must respond to the test of that level to keep prices from dropping down to the 50% retracement at 116-295. Resistance is best set at 117-31. Currently, futures are trading 117-230 on a slight recovery after the sloppy auction.
Mtg backs are hanging in as well still up a couple of ticks. We are right back into the range here and it’s hard to tell which way this thing wants to go. If we can break through resistance at 117-31, I think we have a nice chance to climb higher (better rates) but if we see a close down around that 117-13 level, I think you will see us trading down to that 50% level at 116-295. With the long weekend ahead, I would not be surprised to see this trade off a bit into the late afternoon.