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Stocks are churning sideways in the AM as chip makers and the financial sector drag on major indices. Investor confidence remains finicky as markets weigh the potential implications of the US/China trade quarrel, Italy’s budget, and Brexit fallout. The S&P500 is currently trading at 2,730.03, 0.01% lower.
Treasuries are gaining to begin Friday’s exchange after Federal Reserve Vice Chairman Richard Clarida acknowledged that global growth is slowing. Markets interpreted Clarida’s comments as dovish; as the Vice Chairman expressed that the Fed’s neutral interest rate is within earshot. This week, the US 2/10 yr spread has narrowed about 2bps. The US 10-YR Note is currently trading at 3.0865%, 0.0238 lower.
MBS Performance and Volumes
MBS ended the day mixed versus their Treasury hedge ratios, as market yields continued to push lower. Liquid 30-year Fannies all closed within a tick of the 10-year note’s performance (duration-adjusted), while Ginnie IIs mostly outperformed 10s by 1-3 ticks, with GNII 3s having the strongest session. 15-year Fannies either tracked the 5-year or outperformed by 1/32. Trading volumes were pretty average, with $222 billion in total activity reported by FINRA, including $16.6 billion in specified pools.
TBA MBS’ are moving higher to begin Friday’s trading session, piggybacking off of dovish US Central Bank rhetoric. The domestic economy continues to show signs of strength; however, the global outlook is starting to show cracks as political turmoil and a rout in oil prices are weighing on future growth prospects. Liquid coupons are currently trading 3+ – 4 tics higher.
The USD is down big in the AM after an FOMC official relayed that policy is nearing neutral, and that global growth is slowing. The DXY is currently trading at 96.50, 0.62% lower.
Oil is on track to notch its third consecutive advance as investors bet on an OPEC supply cut next year. WTI is down nearly 10% in November after hitting a 4-year high in October. WTI is currently trading at 57.78, 2.34% higher.