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15th of November 2018

Real Estate



MBS Day Ahead: Weekly Candlestick Chart is Actually Hopeful. Should You Trust It?

MBS Day Ahead: Weekly Candlestick Chart is Actually Hopeful. Should You Trust It?

Right off the bat, with respect to the headline, I'll let you know that the answer is going to be "it depends."  More on that in a moment.   Bonds are starting the day in stronger territory after a weaker CPI reading and a tame European Central Bank announcement.   By the end of the day, we'll have made it through the week's Treasury auction cycle, and a majority of the corporate debt issuance.

All of the above is cause for moderation of the recent pace of bond market weakness.  In the bigger picture, it looks like it has a very good chance to coincide with a technical ceiling that has come into play more than any other in 2018.  For this chart, we're looking at WEEKLY candlesticks.  Believe it or not, market strategists do indeed look at closing levels and other technical studies based on weekly numbers more than you might think.  With that in mind, the prospect for a ceiling to be confirmed (yet again) around 2.97% is very much in play if all goes well (or even "not too poorly") through tomorrow.

2018-9-13 open

Keep in mind that, from a technical standpoint, this ceiling has yet to be "confirmed" as broken. Confirmation would have required TWO weekly candlesticks closing above the line, but back in May, we only got the one before the Italian political drama helped bonds surge lower in yield.  While it could definitely still be broken in the future, for now, this is the defensive ceiling upon which big-picture bond market hopefuls are hanging their hats.

Whether or not you trust it is up to you.  It's looking pretty good today, and that should also be the case tomorrow, as long as Retail Sales doesn't come in surprisingly strong.  The best case scenario from a strategy standpoint would be to see Retail Sales come in stronger but for bonds to hold their ground under the 2.97% ceiling.  That would suggest buyers are resolved to own Treasuries any time yields are approaching 3%.

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

101-11 : +0-03

Treasuries

10 YR

2.9498 : -0.0132

Pricing as of 9/13/18 9:10AMEST

Tomorrow's Economic Calendar

Time Event Period Forecast Prior Thursday, Sep 13 8:30 CPI mm, sa (%)* Aug 0.3 0.2 8:30 Core CPI Year/Year (%)* Aug 2.4 2.4 8:30 Jobless Claims (k) w/e 210 203 13:00 30-Yr Bond Auction (bl)* Read More




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