Today's market commentary

So boring but here's what daily commentary on what's happening in finance.




Tuesday
December 10, 2013

10-YEAR NOTES 99-14 (+11) 2.814%
FN 3.5% COUPON 100-08.5 (+12)
SUPPORT 3.00%
RESISTANCE 2.45%

Overnight, the market saw better buyers and the curve flattening continued. In the U.S., the market is opening up and 2s10s is 4.5 bps flatter. MBS are 1-3 tics tighter with UIC outperforming after underperforming yesterday. The big news today was the announcement by the FHFA to increase g-fees by 10 bps on all 30-Year mortgages as well as changing LLPAs to better reflect credit risk. These fees will go into effect in March/April of 2014 for Cash/Pools. On the taper front, Bullard spoke in St. Louis yesterday and was quoted as saying "a small taper [in December] might recognize labor market improvement while still providing the Fed the opportunity to carefully monitor inflation during the first half of 2014". As market participants attempt to discern whether the Fed tapers in December, January or March it appears the market is setup to handle any/all of the above based on the size of the taper. Regardless of how much the Fed begins to taper, they will still be taking down more than the supply and as long as the market is comfortable with the speed/trajectory and with inflation levels it appears we might be able to get an orderly exit (given the price action post payrolls). The more difficult time will be in 2H14 when the technicals of the Fed vs. Origination begin to skew toward the Origination side of the equation assuming we are still near historic tights on the current coupon basis vs. 10-Yrs.

At 11:00 AM EST there is a UST buyback in the 1/18-2/43 TIPS and at 1:00 PM EST there is a $30 billion 3-Year note auction.

Yes, I read this stuff.

MBS stands for Mortgage Backed Securities

The rest of the alphabet jargon goes over my head.

My take on it? Mortgage rates are going up. Interest rates on US 10 year bonds are going up. Lots of people expect the FED to taper off on it's support for low rates. Me, too.