At first glance, today was all about a de-escalation of yesterday’s Syria rhetoric from Trump (re: “missiles”). Given that we were able to credit yesterday’s news for helping bonds improve, it isn’t too much to ask to believe today’s news could push the other direction. But this didn’t end up being the day’s only market mover for bonds, and possibly not even the biggest. And while I’ll stop short of calling it a red herring (it definitely had an impact impact), there were bigger fish to fry.
The biggest was today’s Treasury auction process. Investors are always somewhat anxious about auctions. With debt issuance increasing (due to fiscal policies… stuff like the tax bill), investors are that much more anxious (after all, Primary Dealers are flat out FORCED to bid).
Traders mitigate this anxiety by pushing rates higher heading into the auction process (higher rates = lower prices = easier to bid at auction). We sometimes refer to this as “concession,” and it was the the order of business in bond markets for much of the mid-morning and early afternoon hours. It also helps explain why bonds were apparently willing to trade the “Syria news” so much more aggressively than stocks.
Bottom line: the geopolitical back-and-forth didn’t help, but the bond-specific challenges made the day what it was.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
99-23 : -0-11
2.8229 : -0.0111
|Pricing as of 4/12/18 7:48PMEST|
Today’s Reprice Alerts and Updates
4:36PM : ALERT ISSUED: Negative Reprice Risk Remains; Bonds at Weakest Levels
1:20PM : 30yr Bond Auction Breakdown
12:07PM : ALERT ISSUED: Negative Reprice Risk Increasing
9:44AM : ALERT ISSUED: NYSE Open Pushes Bonds to Weakest Levels; Limited Reprice Risk (For Now)
8:49AM : No Impact From 8:30am Data; Bonds Remain Slightly Weaker
MBS Live Chat Highlights
Matthew Graham : “B+/A- versus average stats, but C- on the curve (considering today’s sell-off)”
Matthew Graham : “RTRS – PRIMARY DEALERS TAKE 24.4 PCT OF U.S. 29-YEAR 10-MONTH BONDS SALE, DIRECT 14.59 PCT AND INDIRECT 61.02 PCT”
Matthew Graham : “RTRS – U.S. 29-YEAR 10-MONTH BOND BID-TO-COVER RATIO 2.41, NON-COMP BIDS $1.81 MLN”
Matthew Graham : “RTRS – U.S. SELLS $13 BLN 29-YEAR 10-MONTH BONDS AT HIGH YIELD 3.044 PCT, AWARDS 41.80 PCT OF BIDS AT HIGH”
Matthew Graham : “30yr auction preview: When-Issued yield = 3.045. Average auction of this type comes in .6bps higher (so 3.051%). Average bid-to-cover has been in mid 2.2’s for the last 2 refunding auctions. Other auctions average 2.44x. Indirect bids have been just over 60% on average, but were 57% last time.”
Dmitriy S : “We’re also heading into a potentially strong earnings season…”
Matthew Graham : “Also, I blame Rohan”
Matthew Graham : “I.e. 99-26 is real, 99-20 was not”
Matthew Graham : “The more violent MBS spikes are illiquidity-driven and/or fat finger trades/spoofing or otherwise “not real””
Dan Draitser : “That’s a lota red”
Rohan Kothare : “sorry guys i have fat fingers”
Sergio Szyrko : “somebody’s finger slipped and hit the wrong button somewhere lol”
Jared Price : “What on earth….?”
J H : “what the heck is going on?”