Tomorrow, December 5, is a National Day of Mourning in honor of former President George H. W. Bush. The Bond Market will be closed, however Nations Direct will still distribute new rates tomorrow morning based on the previous day’s close. The Lock desk will be open standard business operating hours. Click here to get Nations Direct’s rate sheets and marketing.
Stocks are giving back some of Monday’s gains in the early going as investors digest the latest trade rhetoric from the world’s two-largest economies. Although the G-20 summit produced a 90-day truce to the trade war between the U.S. and China, the time allotted to hash out a viable agreement seems a bit minute. The S&P500 is currently trading at 2,773.74, 0.58% lower, and is up 3.77% YTD.
Treasuries are trending marginally higher in the AM after an inversion of the US Treasury yield curve occurred for the first time since 2007. The yield on the 5-Yr note traded below the yield of the 3-Yr note on Monday, while the 2-yr note traded higher than the 5 year. In short, investors are now being paid more to hold shorter term government debt. Yield curve inversions are seen as a harbinger to a recession, although the time it takes to enter a recession from the time of inversion varies widely. The US 10-YR Note is currently trading at 2.9443%, 0.0254 lower.
MBS Performance and Volumes
MBS were mixed on Monday, as the Treasury yield curve flattened markedly. 30-year Fannies and Ginnie IIs exhibited a down-in-coupon bias; 3s and 3.5s either tracked the 10-year or outperformed by a tick, while 4s and higher underperformed by as much as 5/32s (GNII 5s). 15-year Fannies also showed a DIC bias, as lower-coupon Dwarfs outperformed the 5-year by 2-3 ticks while fuller coupons struggled. Trading volumes were solid, with $188 billion in total activity reported by FINRA, including about $13 billion in spec pool trades.
TBA MBS’ are little changed to begin Tuesday’s exchange is investors await a plethora of economic data coming down the pike. The Fed’s Beige Book, private payrolls, durable goods orders, trade balance, and nonfarm payrolls are all set to be released in the second half of the week, causing asset allocators to sit tight for the time being. Liquid coupons are currently trading 1 – 1+ tics higher.
The USD is losing steam in the AM as investors reassess the US’ growth prospects in the wake of a foggy 2019 interest rate outlook and an inverting yield curve. The DXY is currently 96.76, 0.19% lower.
Oil is moving higher in the early morning shuffle as investors anticipate another round of supply cuts after the OPEC meeting in Vienna this week. WTI is currently trading at 53.46, 0.96% higher.