MBS rally update: Paused moving "Down" in the coupon "

Not only is today silent partnership within the meaning of the trading volume, but there wasn't much direction in the charts on either. The ranges were narrow and only tightened as the day progressed. Short covering again was the main culprit for the lower yields TSY.

Here are a few charts ... ".

FNCL 4.5 is currently visiting levels not seen since 7 December 2010 FNCL 4.4S remain coupon production of choice for loan pipeline hedgers but shift "Down" in the coupon"is still in the infant stage.  It seems as though real money accounts are taking routes "Cheapest to deliver and manage the duration of the interruption of mtg options contracts (CMM/CMS) while quick $ money managers are dabbling in coupons logarithmic as 4 0s and 3.3s.

Replace the coupon FNCL 4.5/4 is a gauge of positive developments with regard to the willingness of the loan pipeline hedgers to move "Down" in the coupon ". I will look for an increase in the sale of loans 4.0 MBS (lock security desk) as the exchange of intercoupon 4.5/4 approach in 280/s wide. Currently Exchange FNCL 4.5/4 is activating around long-term resistance to 312/s.

The chart below shows the cash flows in the TSY 10-yr futures contract. When prices go up and the flow of money fails, the prices of the shares is indicative for short.

Short covering the leading role in driving the current rates.
"Short covering" is at bearish trader closes positions, which was opened with the intent to have a lower price/performance.
The term "short," describes a trader directional bias. Simply "Including" shall mean confinement of an item. The resulting effect on short covering is in "open interest, which represents the number of open contracts on the market. If the operator has set up a short
location and prices continue to rise, and then their position is considered to be
be under water, or "red". Leaving open a short position as rates continue to Rally may be dangerous, because the location gets more expensive with each uptick in the price. So should be the sense that as rates continue to Rally it forced more covering of short, which led to the snowballing on the bond market. Forced covering short is a registered trademark of investors Waving white Flag on their bearish position but does not mean there are more rally to come. This behavior is to promote, especially when done in the matter, but must be intensified
by investors money (as opposed to quick $) need to move their funds "in the coupon". It must also be backed by the confirm weaker economic fundamentals and less protective gear.

Below is an updated version of our long term 10 yr TSY Note yield chart. I took the liberty of drawing a horizontal line at current levels to illustrate the past behavior of the market in a similar environment. As you can see 3.14% has a few drops of steep and profits surrounding it. This reflects the duration of the adjustments required by the fixed income managers cash flow as travel through this level of yield inflection.

We have three "suspects" lying in wait for the event tomorrow. A combination of economic data, Fed Speak and round the Treasury auction should be sufficient to shake things up a bit. In fact, each of the next days 3 contains all three of these participants, with Friday containing only econ data.

Tomorrow kicks off some early 730 am data in the form of the NFIB Small Business optimism Index.
In and of itself is not a significant part of the market mover, but you can add momentum if combined with similarly bearish or bullish ingredients which have been mixed session overnight.  Prices hit on 830 m followed by wholesale trade for 10: 00. Do it for the econ data. Fed Speakers include Duke on 930 m and Lacker in 1245 pm 1 pm finally yields
What is potentially the largest moving day: auction TSY 3 years.