MBS
-1 & 11/32 @ 100.09 10 Yr T
- 1 &12/32 @ 2.1680 DOW + 106 @
15,409
The
last time MBS prices were at these levels was roughly one year ago. A global
stock market rally hurt MBS (see below). Stronger than expected economic data
was another source of pressure on MBS. Consumer Confidence jumped to 76.2,
above the consensus of 72.0, and the highest level since February 2008. The
Case-Shiller home price index increased at the fastest annual rate since 2006.
Weaker than average demand for the 2-yr Treasury auction also was negative for
MBS. Tomorrow, no economic data will be released. The results from the
5-yr Treasury auction will come out around 1:00 et.
Global stock markets have posted large gains yesterday and today. Hints from European Central Bank officials that there will be more easing in the future and stronger than expected US data helped produce the rally in stocks. With the enormous amount of stimulus expected from central banks around the world, investor sentiment has been shifting this month in favor of stocks at the expense of bonds. Investors increasingly believe that they will achieve better returns from stocks than bonds. As a result, the downward trend in MBS prices which began after the release of the Employment report on May 3 has regained momentum today. On several occasions this month, a decline in MBS prices has quickly accelerated, even when the economic news normally wouldn't be expected to cause such a large reaction.
Global stock markets have posted large gains yesterday and today. Hints from European Central Bank officials that there will be more easing in the future and stronger than expected US data helped produce the rally in stocks. With the enormous amount of stimulus expected from central banks around the world, investor sentiment has been shifting this month in favor of stocks at the expense of bonds. Investors increasingly believe that they will achieve better returns from stocks than bonds. As a result, the downward trend in MBS prices which began after the release of the Employment report on May 3 has regained momentum today. On several occasions this month, a decline in MBS prices has quickly accelerated, even when the economic news normally wouldn't be expected to cause such a large reaction.
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