Caveat 1: bond yields hit the highest intraday levels in more than 4 years before the open.
Caveat 2: bond yields hit the highest intraday levels in more than 4 years twice last week.
Those two caveats aside, today wasn’t too bad! Bonds ended up in roughly unchanged territory and managed to avoid taking cues from equities markets. Stocks moved higher after an initial sell-off in the opening hour. The release of Trump’s budget pushed stocks slightly higher again about an hour and a half later.
Bond markets noticeably abstained from reacting to the budget news despite being directly affected by any new issuance that arises from it. On one hand, traders are already positioned fairly defensively with respect to new Treasury issuance. On the other hand, bond traders don’t assume that we’re looking at a final version.
Bigger news arrives on Wednesday morning in the form of the Consumer Price Index (CPI), which has been the most important piece of economic data on any given month since last summer. Barring a “lead-off” move tomorrow (which could serve to expose any remaining trader biases), bonds may well be waiting on CPI before deciding on the next wave of momentum.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
99-25 : -0-06
2.8585 : +0.0275
|Pricing as of 2/12/18 4:52PMEST|
Today’s Reprice Alerts and Updates
12:20PM : ALERT ISSUED: Negative Reprice Risk Increasing
10:57AM : Treasuries Back to Stronger Territory After Opening Weaker; MBS Unchanged
MBS Live Chat Highlights
Sung Kim : “or we die of nukes and robots”
Sung Kim : “cyclical bear in a secular bull”
Sung Kim : “anyway, we will see record lows again, the idea that we won’t – people smoking crack. greed creates excess, excess inefficiently allocates capital, capital is destroyed, CBs come in”
David Mac : “we are very close. Be prepared”
Sung Kim : “the next downturn is going to exacerbate this even further”
Sung Kim : “”What is Different?
There are two important differences that concern me. They are that 1) there is such a big gap between the haves and the have-nots (which creates social and political sensitivities) and 2) the powers of central banks to reverse contractions are more limited than they have ever been (because interest rates are so low and QE is less effective). For these reasons, I worry about what the next economic downturn will be like, though it is unlikely to come soon.” – Ray Dalio”
Sung Kim : “i was just thinking how crazy cheap it is that we get real time data like this for $39/mo”