October 31, 2018

Stocks are rallying hard to begin Wednesday’s exchange as the S&P500 looks to close out October on a positive note. Stronger-than-expected earnings reports from Facebook (FB), and General Motors (GM) coupled with positive private-payrolls data to bolster sentiment on the street.  The S&P500 is currently trading at 2,720.11, 1.40% higher, and is 1.80% higher YTD.

Treasuries are moving slightly lower in the AM after private payrolls were reported stronger-than-expected.  ADP reported 227K jobs added for the month of October, heftily exceeding analyst estimates of a 187K increase.  September’s initial reading was revised down 12K to 218K.  On top of this, the UST department is going to raise the amount of long-term debt issued to $83 billion in Q3, marking the fourth consecutive quarterly increase.  The US 10-Yr Note is currently trading at 3.1416%, 0.0189 higher.

MBS Performance and Volumes
MBS outperformed their Treasury hedge ratios on Thursday, as equities stabilized and Treasury yields moved higher.  30-year Fannies and Ginnie IIs exhibited an up-in-coupon bias; Fannie and GNII 4.5s outperformed the 10-year note by 4 and 3 ticks, respectively, while 3s outpaced 10s by 1/32.  15-year Fannies also outperformed the 5-year note by 1-2 ticks, with fuller coupons (3.5s and 4s) having the strongest session.  Trading volumes remained moderate, with just under $163 billion in total trades, although spec pool activity remains very light, with $8 billion in trades reported by FINRA.

TBA MBS’ are slightly lower to begin Wednesday’s exchange, holding firm in the presence of a strong employment report.  This week, FNCL/G2SF 4.5’s are down 6 and 4+ tics respectively as trade tensions cool and global equities pare losses.  Liquid coupons are currently trading 1+ – 2 tics lower.

The USD is trading marginally higher in the AM as the DXY continues to hover near a 16-month high.  The DXY is currently trading at 97.09, 0.09% higher.

Oil is little changed as supply fears continue to permeate through investor psyche.  WTI is currently trading at 66.29, 0.17% higher.