11/15/2013 Lock Advice: 7 Day - Neutral/Locking 7-15 - Neutral/Locking 15-30 - Neutral/Locking We started the day under pressure as MBS pulled back -18BPS from our 10 day moving average which traders feel is the top end of the market. Empire Manufacturing (NY) was dismal, and both Import and Export Prices were much lighter than expected. Both Industrial Production and Capacity Utilization were also lighter than expected. This helped MBS climb above our early morning lows and eventually tested our ceiling once again. Wholesale Inventories were close to market expectations but the prior period was revised upward. This was negative for bonds and MBS sold off from their 10EST levels. We kept testing that stingy 10 day moving average all day and we finally broke above it at 2:05EST and have been trading above it ever since. While this is very important on a technical level, on a pricing level it means that our benchmark FNMA 3.50 December coupon is only up a mere +7BPS from yesterdays close which isnt enough to change your back end pricing. It remains to be seen if we can close above this important technical level by the end of trading at 5EST The major momentum in pricing for second day continues to be Janet Yellen as she has said she backs the central bank’s unprecedented stimulus program as long as the economy is sluggish, boosting demand for the debt. Both the DOW and NASDAQ are at or near record territory AND MBS are up as well. Once again, proof that bonds and equities are operating independently of each other. As of 11/15/13 4:01EST Last/Close Day Change FNMA Benchmark MBS 101.52 +5BPS 10 Year U.S. Treasury 2.705 1BPS DOW 15962.66 86.44 NASDAQ 3985.97 13.23 Gold 1287.4 0.7
Posted on: Fri, 15 Nov 2013 21:13:09 +0000
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