You Have Gone Zero Days Without a Systemic Contagion Flare-Up
As of Tuesday, the global financial market was able to say it had gone “2” days without a systemic banking contagion flare up. But that number dropped to “0” in the overnight trading session as investors aggressively sold Credit Suisse stock. Other EU banks were dragged down as well. US investors sold stocks first and asked questions later. Once those questions were asked, the move began to reverse, but not nearly enough to erase the day’s bond market gains. Any time this “days without a flare up” sign has a “0” on it, bonds should be doing well. If that number starts ticking higher, rates might feel like doing the same.
Econ Data / Events
-0.4 vs -0.3 f’cast, +3.2 prev
Core Y/Y Producer Price Index
4.4 vs 5.2 f’cast, 5.4 prev
NY Fed Manufacturing
-24.6 vs -8.0 f’cast, -5.8 prev
Market Movement Recap
11:02 AM Sharply stronger overnight on Credit Suisse cliff diving. Fed Funds Rate outlook leading the way so 2yr notes are down 44bps while 10s are “only” down 26bps to 3.42. Remember 3.42? MBS are lagging, which is to be expected amid another flight to safety. 5.5 coupons are up roughly 5/8ths with an eighth point margin of error due to illiquidity.
01:01 PM Rally continues. 10yr down almost 27 bps at 3.42. MBS up 2/3rds of a point in 5.5 coupons.
02:38 PM Plenty of weakness since 1pm with additional selling now after Swiss regulators are said to release a statement soon on a Credit Suisse backstop. MBS up only a quarter point on the day, down a half point from highs. 10yr yields still down 17bps at 3.517, but up more than 10bps from lows.
04:01 PM MBS gradually recovering since 2:30pm ET. Back up by roughly half a point, or slightly more after adjusting for illiquidity. 10yr down 21.6 bps at 3.47.
Source: Mortgage News Daily