Bonds Hold Steady Despite Big Ticket Events

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Welcome to summertime in the bond market, where each day is narrower than the last!  The same can be said for the past 2 weeks and the past several months, for that matter.  By a wide margin, the 3-day trading range surrounding the apex of the Italian political drama easily contains every minute of trading since then.

To put that in perspective, that 3-day range was 2.78-3.01% in 10yr yields.  Today’s range was 2.84-2.87%.  The only interesting thing that can be said for bonds during that time is that they’ve generally moved lower in yield and generally been willing to remain near those lows.

Today didn’t do anything to change the summertime tone.  We even had the week’s most anticipated economic data (at least for the bond market) in the form of CPI.  Unfortunately for those hoping for excitement, CPI was fairly close to consensus.  There were some offsetting factors, such as an uptick in the core annual reading and a downtick in the monthly headline reading. 

The 30yr bond auction didn’t do any better.  It was slightly on the weak side, but not so much as to prompt any major selling in bonds.  MBS and Treasuries drifted toward the close in just barely weaker territory, ready to do this all again tomorrow, barring the appearance of something new and worthy of volatility.


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 4.0

101-29 : +0-00

Treasuries

10 YR

2.8491 : +0.0051

Pricing as of 7/12/18 4:58PMEST

Today’s Reprice Alerts and Updates

1:08PM  :  30yr Auction Not Amazing, But Limited Reaction So Far

8:44AM  :  Uneventful CPI Leaves Bonds Little-Changed at Weaker Levels


MBS Live Chat Highlights

Hugh W. Page  :  “I sense with Powell that Fed actions in the next crisis may not be the same as in the past….”

Timothy Baron  :  “Every time I hear/read Powell, I like it.”

Hugh W. Page  :  “This is the most important comment in that interview to me: “So we spent a decade going back and fixing, addressing all of those weaknesses which essentially require the government and the taxpayer to step in behind the financial system, and the banks in particular, and put the taxpayer at risk. So we don’t want to do that again. I think nationally everyone looked around and said, “Let’s not do that again any time soon.”

And I think it’s really important that we protect and extend the main pillars of what we did: higher capital, higher liquidity, better risk management, stress testing, living wills and resolution plans, in case banks do fail. We’re not going to forget those lessons, but we’re going to try to make sure that the things that we’ve done have been right and efficient too.””

Matthew Graham  :  “LC, that’s actually a useful point because he’s calling attention to his awareness of the extent to which the verbiage is dissected. That means we can continue to read at least some significance into seemingly subtle verbiage changes, knowing that their potential impact has been considered by Powell and co.”

Louie Colatriano  :  “He’s talking to you MG! “there’s a professional audience that follows us very carefully, every comma, every word change.””

Matthew Graham  :  “No major concession ahead of time and only missed by 0.3bps (not that big when it comes to 30yr auction)”

Matthew Graham  :  “last 2 auctions had 2.38x bid-to-cover, which is the reason for the B- instead of a C-ish grade”

Matthew Graham  :  “RTRS – PRIMARY DEALERS TAKE 27.8 PCT OF U.S. 29-YEAR 10-MONTH BONDS SALE, DIRECT 10.33 PCT AND INDIRECT 61.88 PCT”

Matthew Graham  :  “RTRS – U.S. 29-YEAR 10-MONTH BOND BID-TO-COVER RATIO 2.34, NON-COMP BIDS $4.94 MLN”

Matthew Graham  :  “RTRS – U.S. SELLS $14 BLN 29-YEAR 10-MONTH BONDS AT HIGH YIELD 2.958 PCT, AWARDS 46.90 PCT OF BIDS AT HIGH”

Matthew Graham  :  “30yr auction preview: recent average bid-to-cover = 2.5x, estimated yield = 2.955, indirect bid = 63% avg. For explanations of these terms see this: Treasury Auction Jargon, Definition, and Significance


Economic Calendar

Time Event Period Actual Forecast Prior
Thursday, Jul 12
8:30 Core CPI Year/Year (%)* Jun +2.3 2.3 2.2
8:30 CPI mm, sa (%)* Jun +0.1 0.2 0.2
8:30 Jobless Claims (k) w/e 214 225 231
Friday, Jul 13
8:30 Export prices mm (%)* Jun 0.2 0.6
8:30 Import prices mm (%)* Jun 0.1 0.6
10:00 5yr Inflation Outlook (%)* Jul 2.5
10:00 1yr Inflation Outlook (%)* Jul 2.8
10:00 Consumer Sentiment Jul 98.2 98.0



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