Miscellany

June 2nd, 2009 10:37 am | by John Jansen |

New home sales provided (seemingly) evidence of more green shoots and has caused the bond market to surrender gains achieved in overnight and opening hours trading.

Regarding the green shoots, I am suspicious. It is a small sample and the gains are concentrated in the Northeast. I do not discern a reason which would allow for a robust result in here the northeast while the other sections of the country fail to experience the same result.

Swap spreads are leaking wider and indicate more hedging activity. The mantra this morning from participants is that we are sitting at levels in MBS at which small moves in either direction call forth hedgers.

The market is thin and after the recent wild movements the VAR police are on active patrol and risk appetites have been damped down.

Two year spreads a1/4 basis point tighter at 47 1/2. Three year spreads are 2 basis points tighter at 57. Five year spreads are 1 basis point tighter at 51 1/4. Seven year spreads are 1 1/2 basis points tighter at 30 3/4. Ten year spreads are 3/4 basis point wider at 33 and thirty year spreads are 1 1/4 basis point wider at NEGATIVE 13 1/2.

The 3month 10 year ATM straddle trades 664 mid.

Mortgages are lagging swaps by about 5 ticks but the higher coupons are doing better.

The 5 year is being incinerated against 2s and 30s as the butterfly is 39 basis points.

The 2year/10 year spread is back to near record levels at 275 basis points.

The 2year 5 year spread is 160 basis points this morning and I do not believe it has been that wide in 20 years.

Update: Someone just told me that the 2year/5 year at 160 basis points is a 40 year wide.

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  1. 8 Responses to “Miscellany”

  2. By Bman on Jun 2, 2009 | Reply

    John, agreed on above. In addition, prices continue to fall and foreclosures continue to rise. Sorry to tangent here, but I have an observation. The Baltic Dry Index has been up every single day since April 29th – and not just up, but massive increases. Does anyone have more experience/insight into this?

  3. By John Jansen on Jun 2, 2009 | Reply

    I do not have insight on that and i am interested in the new verb “to tangent”!!!

  4. By Bman on Jun 2, 2009 | Reply

    sorry – finance major, not english. That’s why I try to glean your vocabulary/Latin expertise! 🙂

  5. By S on Jun 2, 2009 | Reply

    Northeast rocking. Bloomberg ran an article last week that the Hamptons has 40 months of supply and tsales down 60%. Exactly where in the northeast are homes selling other than thos ebuying fasrmland in the Berkshires as a hedge against BB

  6. By S on Jun 2, 2009 | Reply

    ‘Baltic Dry Index has been up every single day since April 29th – and not just up, but massive increases. Does anyone have more experience/insight into this?”

    ML downgraded the shippers bulks today in japan – GS raised the shippers last week as a macro bet on the resumption of trade flows and rising exports.

  7. By John Jansen on Jun 2, 2009 | Reply

    tangent is from Latin tango tangere tegi tactus.

    To touch. A tangent touches the circle. Or tactile the sense. Or tangible.

    My father who died nearly a year ago forced me to study Latin and it was my first college major. I will always be indebted to him for that as it is a great tool.

    https://acrossthecurve.com/?p=971

  8. By Bman on Jun 2, 2009 | Reply

    There we go… “Chinese Industrial Company Said to Be Buyer of Hummer (Story Developing”

  9. By pwm76 on Jun 2, 2009 | Reply

    Are you referring to pending home sales? I’ve been reading that half of the mortgages in the pipeline got derailed by last week’s mortgage rate volatility.

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