MBS RECAP: Stocks and Bonds Better


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1:42PM  : 
Bearish investors cut stocks, boost bonds: Reuters poll
(Reuters) – Investors are the most bearish they have been since last year’s third quarter, cutting their exposure to stocks in May for the fourth month in a row, Reuters polls showed on Tuesday.
Concerns about a slowing global economy and nagging worries about Greek and other peripheral euro zone debt also prompted investors to move into bonds and cash.
Surveys of 58 leading investment houses in the United States, Europe ex-UK, Japan and Britain showed global equity holdings at their lowest since August last year. Bonds and cash were at their highest since September.
“Greece’s debt problem and a slowdown in the U.S. economy are increasing uncertainty in financial markets globally,” said Yoshinori Nagano, a senior strategist at Daiwa Asset Management.
Specifically, equity holdings in an average mixed portfolio dropped to 50.7 percent, the lowest since August, from 51.3 percent in April. There has been a steady drop every month since January.
Bond holdings rose to 35.5 percent from 34.6 percent, and cash, where investors tend to go when becoming cautious, rose to 5.2 percent from 5.1 percent.
Investors have been made wary by signs of sluggishness in the U.S. economy with high petrol prices crimping consumer spending and bad weather helping to push pending home sales to a seven-month low in April among other factors.
There is also some positioning ahead of the U.S. Federal Reserve’s ending of its asset-buying quantitative easing program.

11:25AM  : 
Stable Near Best Levels. Possible Positive Reprices
MBS are only up 3 ticks on the day, yet reprices for the better are becoming a possibility the longer we hold current levels. This isn’t likely to be a widespread phenomenon, but for lenders pricing conservatively, and near this morning’s low MBS marks, it’s only a matter of time spent holding the highs of the day before a token or two is coaxed out of the worst rate sheets. Looking at 10yr notes by way of a benchmark for the general ocean of sentiment in which MBS swim, we get the overwhelming sense of “range reinforcement.” What does that mean? 10yr yields carved out a new, lower notch in their range on Thursday and Friday with support bounces (ceiling) seen around 3.095 and resistance bounces (floor) seen around 3.055. Simply put, so far this morning, yields have see resistance and support bounces at the same levels, thus reinforcing this recent range. Although MBS hasn’t made it back to their Friday highs in the same way 10yr yields made it back to Friday lows, FNCL 4.5’s are still 3 ticks up on the day at 103-26. 10yr yields are at 3.0607 currently, and like MBS, haven’t moved far from their best levels of the day. In the intermediate term, this 4 bp range in benchmark 10’s is too narrow to be maintained for long. If it doesn’t see a significant break before NFP, it’s all but guaranteed after the report hits at 830am this Friday morning.

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