Typically Boring Consolidation Ahead of The Fed


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There were quite a few economic reports on tap today, and that made for some entertaining market watching!  Reason being, every time a report came out, bonds were in the middle of one of their periodic sideways plateaus that followed what little market movement we actually witnessed.  That actual market movement was almost entirely a byproduct of traders cleaning up their positions for the end of the week.

The preceding paragraph is the sort of thing I might have read 15 years ago and incredulously wondered “sure buddy, but how do you know such things and why would I take your word for it?!” 

Don’t take my word for it.  Just look at this chart of 10yr yields and the yield curve.  It doesn’t really matter which line is which (yellow line is 10s) because we’re focused on the purple-ish volume (10yr Treasuries futures) at the bottom.  Then simply consider that there is absolutely nothing else going on in the market at 8:20am besides the opening bell of CME pit trading (the unofficial bond market open due to Treasuries options).  Or consider the other volume spike after 10am–another time of day when nothing else was going on besides Treasuries traders simply DECIDING to hold the line at the 2.86% technical level that we laid out as a ceiling quite some time ago.

Bottom line: this is a consolidation ahead of the Fed.  Granted, there can also be a lead-off in one direction or the other, but any major movement will depend on what the Fed actually has to say next Wednesday (unexpected tape-bombs notwithstanding).

MBS Pricing Snapshot

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


FNMA 3.5

99-26 : -0-01


10 YR

2.8445 : +0.0205

Pricing as of 3/16/18 5:34PMEST

Today’s Reprice Alerts and Updates

10:21AM  :  ALERT ISSUED: Negative Reprice Risk increasing

9:09AM  :  ALERT ISSUED: Weaker After Morning Data But Not Because of It

MBS Live Chat Highlights

Sung Kim  :  “You MUST ALWAYS pull a new report with a rapid rescore. You can’t just get new credit scores based on one trade line.”

Sung Kim  :  “No”

Matthew Graham  :  “I haven’t given that much thought, nor has it come up around any analytical campfires that I frequent. I hate to simply say “no” in a dismissive sort of way on the off chance that I’m not seeing a particular risk, but…. “no, probably not.””

Edgar  :  “MG: Should we at all pay attention to/worry about the LIBOR problems possibly affecting MBS?”

Economic Calendar

Time Event Period Actual Forecast Prior
Friday, Mar 16
8:30 Housing starts number mm (ml)* Feb 1.236 1.290 1.326
8:30 Building permits: number (ml)* Feb 1.298 1.320 1.377
9:15 Capacity Utilization (%) Feb 77.5
9:15 Industrial Production (%) Feb +1.1 0.3 -0.1
10:00 1yr Inflation Outlook (%)* Mar 2.9 2.7
10:00 5yr Inflation Outlook (%)* Mar 2.5 2.5
10:00 Consumer Sentiment Mar 102.0 99.3 99.7

Original Source