Bond Traders Have Had Enough

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Bond traders are increasingly saying “enough already!” when it comes to reacting to every little push and pull in the tug-o-war over the tax bill.  After headlines suggested Rubio may be pulling his “yes” vote yesterday, today’s news was different.  Concessions were made and the GOP once again had enough votes to move forward.

Stocks and bonds moved lower together with yesterday’s Rubio headlines and higher with today’s.  Granted, this was a much bigger deal for stocks, but bonds were taking part nonetheless.  That is, until this afternoon when bonds decided enough was enough and proceeded to rally back toward ‘unchanged.’

Was it really as simple as bond traders getting fed up with all the political horse-trading?  No, not even remotely.  Bond traders have figured that Trump + a republican House and Senate would mean increased bond market issuance at some point.  The only question is what it looked like.  As of this afternoon, it looks like another 1.456 trillion dollars of debt for the US (though some of that will ostensibly be offset by stronger growth and repatriation incentives. 

What was the afternoon rally all about then?

A) It doesn’t much matter because we’re flat and in the middle of a broader, super flat range.  Volumes and participation have declined over the past 2 days as well, and traders are already tuning out for the holidays.

B) With traders already tuning out for the holidays, today would have been an ideal “last call” for liquidity when it comes to month end trading needs.  It’s not that traders necessarily set their final positions  for the month today.  Rather, they simply made sure they were stocked up on what they needed (or didn’t need) in order to avoid scrambling to take care of business when it’s harder to take care of at the end of December.  In today’s case, this meant bonds improved modestly.


MBS Pricing Snapshot

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.

MBS

FNMA 3.5

102-26 : -0-01

Treasuries

10 YR

2.3512 : +0.0052

Pricing as of 12/15/17 7:31PMEST

Today’s Reprice Alerts and Updates

2:01PM  :  Ignore The Big Swings in MBS (If You’re Seeing Them)

11:41AM  :  Tax On. Tax Off

10:20AM  :  ALERT ISSUED: Negative Risks Now Creeping Up

9:42AM  :  Bonds Under Some Pressure; Reprice Risk Considerations


MBS Live Chat Highlights

Andy Pada, Jr.  :  “SK is Neo”

Sung Kim  :  “we are part of the matrix and the rich control the matrix”

Sung Kim  :  “it makes perfect sense to me CR”

Caroline Roy  :  “but we are kkeping 1031 in place so that investors don’t pay it. makes sense.”

Andy Pada, Jr.  :  “sorry, yes, I think JA is correct”

Jason Anker  :  “think so SK, 4 years, made 25k, all 25k is taxed at cap gains”

Sung Kim  :  “so, let me confirm, if the bill is now 5/8, so if less than 5 years 100% of any appreciation is taxed at cap gains rate?”

Jason Anker  :  “right”

Caroline Roy  :  “whoa. must have occupied for 5 of last 8 years? so many people don’t even own the same house for more than 5”

Jason Anker  :  “5 of 8 from 2 of 3 no?”

Caroline Roy  :  “AP, what was the increase on time to avoid Cap gains on a primary?”

Andy Pada, Jr.  :  “if we accept the premise that millennials have a proclivity towards mobility, the requirement to stay in a particular home for at least 5 years to take advantage of the tax free sale, will result in even lower purchases.”

Matthew Graham  :  “RTRS – U.S. REPUBLICAN SENATOR RUBIO WILL SUPPORT COMPROMISE TAX BILL -CNBC, CITING SOURCES”

Matthew Graham  :  “RTRS – U.S. HOUSE WAYS AND MEANS COMMITTEE CHAIRMAN BRADY SAYS REPUBLICANS HAVE FINISHED TAX LEGISLATION AND DETAILS WILL BE RELEASED LATER ON FRIDAY”




Original Source