Archive for June, 2014

Miscellany

Friday, June 27th, 2014

My previous post was about the early close next Thursday for the long holiday weekend. The market should have closed early today,too. This reminds me of my early days at the Open Market Desk in the very late 70s when street traders would regale me with tales of a then ...

Early Close Next Thursday

Friday, June 27th, 2014

Via SIFMA

MBS

Friday, June 27th, 2014

Mortgages have faded from the best levels reported earlier (here) and are now just 1 tick better than Treasuries. Dealers report real money sellers of FNMA 3 1/2s.

Repo Men

Friday, June 27th, 2014

Excellent article on Fed's portfolio and specials in repo market. Via Bloomberg: Lack of Fed Ownership Driving Current Repo Fails, Barclays Says 2014-06-27 15:17:35.419 GMT By Alexandra Harris June 27 (Bloomberg) -- Fact that Fed doesn’t own on-the-run (OTR) 5Y or 10Y securities may be driving the “surge” in recent fails, Barclays strategist Joseph Abate writes in note. * Increased OTR repo specialness also means the Fed avoids buying securities as part of its QE purchases * Operation Twist and sale of all the Fed’s <3yr paper means Fed holdings all mature after early 2016 * Without maturing paper, Fed is unable to buy OTR issues at auctions * Absence of Fed OTR supply, dealers can either fail and pay 300bp fee for not completing delivery or offer a “sufficiently low” financing rate to “coax” supply back to market * While regularly scheduled reopenings and supply “lured” from customer holdings will eventually cheapen the securities, they may trade “deeply special” until then * Raises the issue of Fed’s investment policy, as ending it “is not costless” * “Without reinvestment, markets may have to get used to OTR issues that are permanently more expensive to borrow in repo” * For markets to remain “liquid and undisrupted” without the backstop of the Fed’s daily securities lending program, 300bp fails charge needs to “prevent incomplete deliveries from rising to the point where they become disruptive” * Not clear “what level of fails might be considered large enough to warrant reconsidering the Fed’s reinvestment policy” * Recent surge in fails doesn’t seem to have “disrupted” markets, as dealers, other investors still able to cover shorts even though it’s more expensive

Summary of Corporate Bond Issuance This Week

Friday, June 27th, 2014

Via Bloomberg: IG CREDIT: IG Volume Drops for Second Straight Week 2014-06-27 14:39:28.28 GMT By Lisa Loray June 27 (Bloomberg) -- $19.25b priced from 20 issuers in 35 tranches for the week ending June 27, failing to top $20b for only the fifth time this year and a decline of 25% from last week, 57% from the ...

Treasury Market Update

Friday, June 27th, 2014

The Treasury market is well bid and grinding higher in price. The yield curve is marginally steeper than it was at 600AM this morning. For example 5s 10s is 88.5 versus 88.4 and 5s 30s is 171.4 versus 171.3. Most participants lament the lack of activity and the low level ...

TD Securities on Consumer Confidence

Friday, June 27th, 2014

Via TD Securities: The final June Michigan consumer confidence report outperformed market expectations, revised to 82.5 from a preliminary 81.2 reading. This leaves Michigan confidence higher on the month, with the 82.5 June print showing some progress in consumer sentiment compared with the 81.9 reading in May. Both current conditions and ...

Monsanto Run

Friday, June 27th, 2014

Here is a run of the multi tranche Monsanto deal which priced yesterday. Via a fully paid up subscriber: A3/A- MON 1.15 6/30/17 28/26 +30 A3/A- MON 2.125 7/15/19 47/44 +50 A3/A- MON 2.75 7/15/21 64/60 +65 A3/A- MON 3.375 7/15/24 79/74 +85 A3/A- MON 4.20 7/15/34 85/81 +90 A3/A- MON 4.40 7/15/44 108/104 +110 A3/A- MON 4.70 ...

MBS

Friday, June 27th, 2014

Mortgages have opened 1+ tighter to Treasuries. There has been modest buy interest in the 3.5 coupon. There has been virtually no origination flow. Fifteen year paper lags 30 year paper by 1 tick.

FX

Friday, June 27th, 2014

Via Mark Chandler at Brown Brothers Harriman: Global markets remain quiet.  Trading has been constrained by a variety of factors, including the World Cup and the start of the summer season.  For the most part, the dollar closes out a soft week that was driven by disappointing US data.  Perhaps next ...