MBS MID-DAY: 11/18/2011


A familiar cast of “risk-on” characters combined to help stock futures, the Euro, and Treasury yields climb higher last night. MBS opened about 4 ticks lower than yesterday’s 5pm levels and are currently at 101-24. SP futures are currently in the mid 1220’s after falling below 1210 yesterday and 10yr yields are just over 2% after falling just below 1.95 yesterday and again earlier in the overnight session.

But shortly after 3am New York time, the “risk-on” light started getting brighter amidst decent, but not overwhelming volume. Beyond the obvious technical considerations of both US Stocks and 10yr yields hitting their November lows yesterday as well as the fact that it just “feels like it was about time for” a reversal of the risk-off trading of European headlines based on recent runs in sovereign debt spreads and the like, a few market movers to note from the overnight session include:

– ECB chief Draghi calls on EU governments to act quickly in utilizing the EFSF bailout fund

– This also fueled earlier speculation that the ECB will soon be directly injecting capital as opposed to buying EU debt

– Speaking of which, the ECB continues to buy EU Debt, a fact that buoyed sovereign debt overnight

– Germany’s Schaeuble says Greece is a one-of-a-kind issue

There’s really nothing on tap as far as economic data today. It’s a longshot for Leading Indicators at 10am to ever be a market mover and the first instance of Fed Speak from NY Fed’s Dudley is already out with no market reaction. With 10yr yields around 2%, we’re already seeing much of the correction we (probably) expected after yesterday’s technical wall was hit, and could really go either way from here.

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