Give this baby a C. Currently, the street is showing its dissatisfaction as the 10 year note is off 8/32’s and MBS off 3/32’s. No rest for the wicked.
The best the market can hope for (short term) is to stabilize at current levels given all the uncertainty in stocks and global assets. Good idea to stay defensive and see how the next day and a half play out.
On the bright side, daily oscillators are still posting positive readings and holding above midrange levels. All good things for those that want lower mortgages/better pricing.
The market was looking for a better number, given high hopes of a better holiday season. We see the negative December reading as unsettling, reflecting a consumer that has started to spend but at a snail’s pace.
Results just hit the tape with a 3.0 to 1 [...]
Trouble is, every sector of the curve remains weak and cannot be trusted. Until we see a bottom (which we feel is close) you must stay on defense. Kind of a Yogi Berra thing, “it’s not over till it’s over.”
16 billion of 30 year bonds changed hands at a yield 4.469%, bid to cover 2.26 to 1 (average 2.45 to 1), indirect bidders took 44% of the paper, and the final yield on a price weighted basis created a 3.5 bps tail (not so hot). Overall, we’ll give this one a C. Fast money traders sold the market post auction but currently, we are making a comeback. Mortgage levels are now unchanged from pre-auction levels with only the 30 year note underwater (down 11/32’s).
This one had the tail of a German Shepherd (2.3 bps) versus that of a Rottweiler, adding to the lack of interest. Both the 10 year and MBS took it on the nose post auction. At one time, the note was down 1 point and MBS off 10/32’s. Watch stocks, any close up 100 plus will keep the heat on MBS.
Strange forces at work here that are driving the market so take advantage. Technically, buyers have taken pricing through major resistance which have formed bullish readings on trend studies and oscillators. The move has also confirmed a “hammer bottom” on yesterday’s candlestick charts however, daily studies will need time to catch up for a full blown rally. Call the market, bullish, schizophrenic, Sybil (remember the movie), irrational, and interesting. It’s a lot like herding cats.
The 10 year note auction crossed the tape at 3.736% [...]
