MBS MID-DAY: Dying Down Ahead Of Long Weekend


Bond markets made a quick head fake in a weaker direction following the better-than-expected Consumer Sentiment release at 9:55am, but must have quickly remembered that it’s Europe, and not the domestic consumer, that’s at the heart of the ongoing epic flight-to-safety.  Indeed, today is one of those days where bond markets and the European currency are very well linked-up, the latter taking it’s first major cue of the morning on news out of Spain that its wealthiest province officially asked for help from the Spanish government to service its debt.  Since then, the Euro fell to test a technical boundary at 1.25, which set up the lows that began the ensuing range trade with the highs ostensibly inspired by levels immediately preceding the Spain news.  It’s all right here in this chart…

And if you’ve seen a chart of the Euro today, you’ve basically seen a slightly less muted version of the Treasury chart, and MBS is simply another slightly-muted degree of separation from Treasuries.  Things have been sideways and boring since the Euro bounced just before 10am.  Unless acted upon by significant outside influences, they’re likely to stay that way for the next 2 hours and change into the early close at 2pm Eastern.

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