Shutdown Deal Hurts Bonds, But Mostly Helped Stocks

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Sharp Credit – Credit News – Credit Information

It’s hard to say exactly where stocks and bonds would be today absent the news from yesterday night regarding a possible shutdown deal.  Both sides of the market were already in the process of bouncing as of last Friday–with yesterday’s closing levels acting to extend that move.

The shutdown news didn’t hut until after the close.  It definitely had an impact, but it’s impossible to say that trading levels would be very different without it. In fact, bonds lost ground at a slower pace today compared to yesterday, so at the very least, we can conclude that bonds aren’t hung up about it.  The last remaining unknown with respect to this shutdown saga is what, if any, reaction we’ll see when the deal is finalized.  There too, it’s safe to say it’s not going to be a defining moment for the bond market, even if it’s worth another token reaction.

The more visible impact was in the stock market today, but only when we’re looking at stocks closely enough.  The more we zoom out, the more everything blurs together as one, prolonged uptrend leading back from late-December lows.  The same exercise in bonds leaves us looking at the same old consolidation we’ve been tracking with absolutely no threat presented by shutdown news.

2019-2-12 close


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

100-06 : -0-04

Treasuries

10 YR

2.6860 : +0.0250

Pricing as of 2/12/19 5:16PMEST

Today’s Reprice Alerts and Updates

8:46AM  :  Bonds Weaker Overnight on Shutdown Deal News


MBS Live Chat Highlights

Matthew Graham  :  “certainly, many already have been. We’ll see how much attention is being paid with Thursday’s Retail Sales (for December)”

aaron meyer  :  “but many of those reports might be delayed”

Matthew Graham  :  “modestly positive. Not a defining event for bonds. Trade headlines, Brexit, EU econ data, domestic econ data–all bigger deals than shutdown.”

Ted Rood  :  “I concur that the likely short term effect would boost MBS prices.”

aaron meyer  :  “I don’t think dysfunction in Washington is good for anything”

Jason Choi  :  “its a positive effect for us right? I am correct to float if I believe shutdown will happen?”

Ted Rood  :  “Seems less likely than last time”

Jason Choi  :  “If the shutdown happens again starting this Saturday, is it positive for FNMA pricing?”

Matthew Graham  :  “i agree the Fed seems flighty recently, but it’s also a real thing that the European economic downturn seems precipitous to US traders”

Andy Pada, Jr.  :  “I think MG may have had a post a week or two ago about Europe and Germany that may explain your view on the Fed’s disposition”

John Tassios  :  “something is def up with FED. From Oct – Nov period was pretty hawkish with both rates and bal sheet. In late Dec – Jan complete 180 reversal to much more dovish. so what has really changed in that short period of time to warrant complete reversal? @2cents”

Victor Burek  :  “TRUMP SAYS BORDER PLAN ISN’T `DOING THE TRICK’, BUT WILL STUDY”

Victor Burek  :  “TRUMP SAYS HE DOESN’T EXPECT A SHUTDOWN”

John Tassios  :  “exactly MH – FED never has been able to predict recessions”

Matt Hodges  :  “because the Fed can only recognize a recession after it has occurred? Odd statement. Plus, what kind of message would that send to the economy? Well..it was a good run, but we are contracting now…”

Victor Burek  :  “FED’S POWELL SAYS DOES NOT FEEL PROBABILITY OF RECESSION IS AT ALL ELEVATED”


Economic Calendar

Time Event Period Actual Forecast Prior
Wednesday, Feb 13
7:00 MBA Purchase Index w/e 253.1
7:00 Mortgage Refinance Index w/e 1053.4
8:30 Core CPI Year/Year (%)* Jan 2.1 2.2
8:30 CPI mm, sa (%)* Jan 0.1 -0.1



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