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MBS Prices Likely to Continue Declining

December 3, 2013 by · Leave a Comment 

MBS prices were hit hard again Monday by strong manufacturing data, suggestive of still further growth to come. Both the ISM Manufacturing Survey, and the PMI Manufacturing Survey for the US showed better-than-expected strength in November, and that put a lot of pressure on MBS prices. Prices had opened worse on the day before any of the US data came out on similarly strong data from Europe. By day’s end, the result was a 50 basis point loss in MBS prices, while the 10-year Treasury yield jumped higher to 2.80%.

Wages in Japan continued their year-and-a-half fall, down 0.4% in October at the base level, although overtime and bonuses brought wage gains into the green. Much of the increase in bonuses and overtime was in the manufacturing sector. India’s current-account deficit fell in the 3rd quarter, down to just $5.2 billion from $21.8 billion in the prior quarter. A tax on gold imports was seen as a driving factor in this. Standard and Poor’s upgraded its opinion of Cypriot debt to B-/B yesterday, citing reduced risks, but at that level, the debt remains highly speculative. The number of unemployed in Spain fell 2500 in November, the first decline in that month since 1997. The improvement barely scratches the surface of the 4.8 million unemployed there, though. Wholesale prices in Europe fell sharply in October according to the PPI, down 0.5% on the month, where a smaller decline was anticipated. Wholesale prices are 1.4% lower today than a year ago.

There is no US data of any consequence today.

MBS prices are slightly better this morning, rebounding from yesterday’s heavy selloff, as there is no news of consequence to pricing domestically at the moment. Foreign data, and some comments from Japan, suggest that stimulus measures will continue there, especially as base wages fall. Getting that number into the black will be very important to maintaining inflation growth, and that’s going to drive the Bank of Japan to consider further measures. MBS prices are out of their support range, though, as the recent price movement has pulled prices outside of the range of the recent moving averages – we’re now below that level altogether. This means that prices could very easily continue to get worse, meaning that locking is prescribed in most cases at this point. There will be more data coming tomorrow and Thursday, and that could help in restoring pricing if the data is worse than anticipated, but better data will have a chilling effect on fixed income.

 

<15 days: lock

15-30 days: lock

30-45 days: lock

45+ days: consider locking

Neutral Economic Performances

October 30, 2013 by · Leave a Comment 

MBS prices had another relatively flat day yesterday, struggling mightily around the unchanged mark for much of the day before notching a very modest 9 basis point gain at the close of trading. Economic data was largely neutral, except for consumer confidence, which came in much lower than expected at 71.2 as consumers expressed their doubts about the future health of the economy. This resulted in a bit more strength in fixed income prices which also led the 10-year Treasury yield to close down slightly to 2.51%. Overall, though it was another day of largely range-bound trading.

A second measurement of Spain’s economic growth in the 3rd quarter confirms an earlier measurement that saw that economy growing a scant 0.1% on the quarter, although that is far better than the nation has seen for growth of late. The interesting component to this growth is that it has come largely on the back of exports, as Spain has recently switched into a trade surplus for the first time in recent memory. Inflation there is a non-issue; nationally prices are 0.1% lower year over year. The country still has a way to go to be in good shape, as the public deficit is still among the Euro-zone’s highest. Growth may be cooling in Germany, if unemployment figures are any reflection of it. 2000 additional workers reported being unemployed, bringing that nation’s total unemployed to 2.97 million in October, although this was not enough to move the jobless rate from its former reading at 6.9%. More of the unemployment is concentrated in the formerly Communist East Germany where the official rate is 10.3%, while West German unemployment is just 6.1%. European Economic Sentiment improved modestly in October, up 0.9 points to 97.8 as both consumer and industrial confidence rose modestly. The reading beat expectations by 0.6 points. German consumer prices declined 0.2% in October’s preliminary report, up just 1.2% for the past year.

In US data today, we have several consequential reports, starting with the ADP employment report. Employers added 130,000 jobs in October, fewer than the already weak 138,000 analysts had anticipated, and further weakened by the downward revision of September’s result by 21,000 jobs. This has set the initial estimate for next week’s release of the official employment figures back, with just 126,000 positions expected. US consumer prices rose 0.2% overall, 0.1% at the core level in September, in yet another indication that the Fed need not fear inflation. Prices are up 1.2% overall and 1.7% at the core level in the past 12 months. This afternoon the Fed will make an announcement. I don’t anticipate much of any change in sentiment there, with the most likely change to the announcement being an expression of disappointment at the inability of Congress and the White House to lead the country.

MBS prices are modestly better this morning, up 15 basis points in early trade, as the weak employment numbers are bolstering expectations for the Fed to continue its support of bond prices. The 10-year Treasury yield is down slightly to 2.49%. It’s possible, but not too likely, that the Fed announcement this afternoon will seriously impact MBS trade. The Fed statement is already almost a foregone conclusion. There is nothing holding up the US economy right now except the Fed’s willingness to pump money into the system, as leadership inaction is impacting trader willingness to do much of anything. For the moment, we have a little more wiggle room to go on floating, with some industrial numbers due Friday that might impact pricing, but not much else.

<15 days: lock

15-30 days: consider locking

30-45 days: consider floating

45+ days: float

Short-Term Floating Recommended

October 25, 2013 by · Leave a Comment 

MBS prices were little changed yesterday as an unemployment claims report little different than expectations let traders kept pricing just about where it started the day. 350,000 Americans filed claims in the prior week, a number skewed higher by continuing resolution of a backlog in California. There was a little weakness in late trading that resulted in a modest decline in pricing in late action. The 10-year Treasury yield rose slightly to 2.51%.

Germany’s Ifo survey of business climate showed essentially flat conditions in October compared to September, although future expectations appear to be weakening. Retail sales in Italy were flat in August, bucking expectations of a decline. Generally a quiet day for international finance.

Three key US reports are out today. Durable goods orders jumped in September, rising 3.7%, but you can point all of that gain squarely at Boeing. After commercial aircraft orders are excluded, orders actually fell 0.1% on the month. Year over year, though, orders excluding aviation are up 5.6%. Consumer sentiment fell more than expected, down 2 points to 73.2. A more modest decline had been anticipated. Expectations in particular were soft. Wholesale inventories grew in August, up 0.5%, besting expectations for a weaker rise.

In general, today’s data is favorable to rates, and markets are accepting that, with MBS prices having traded stronger throughout the day, while the 10-year Treasury is down to 2.50%. There are some modest headwinds holding back rates from rising at the moment, and we’ll take all of that we can get. Next week is busy with data, but light on rate-influential reports. At the moment, floating isn’t a bad idea at all for anything some distance from closing, with floating to Monday a sure bet to at least hold about the same pricing as today.

<15 days: lock

15-30 days: consider locking

30-45 days: consider floating

45+ days: float

The Return of the Government

October 22, 2013 by · Leave a Comment 

We have a deal. After weeks of hemming and hawing, Congress and the Senate have come together to reopen government, 16 days after allowing it to shut down, lawmakers have agreed to allow government to continue operating at spending levels equivalent to those prior to the shutdown. However, the extension is short lived – it will run out in January, extending the debt ceiling only slightly further. The short duration of the extension, and the significant possibility another will be needed before real progress occurs proved to be a booster for fixed income, at a minimum assuring investors that bills will get paid, but that we’ll be right back in the same spot within just a few months. MBS prices gained sharply on the news, picking up over 40 basis points on the day, while the 10-year Treasury yield fell to 2.67%.
 
There is no international news of any consequence whatsoever today. International reaction to the US debt ceiling deal has been mixed, with the Euro gaining against the dollar, while stocks were mixed in Asia and mildly worse in Europe.
 
US data is back, although it is unclear how significant delays may be to previously delayed reports. It is likely we’ll see an updated schedule at some point next week. There are several reports out today of significance, and they are influencing MBS prices significantly today, but some reports are delayed as the government gets back on track. Housing starts and Industrial production were both delayed due to lack of data from the government. Unemployment claims fell, but remain elevated, with claims falling to 358,000 last week, still above the recent low level, as the glitches with California data continue to smooth, and workers laid off due to the shutdown make their way to unemployment rolls. Easing in claims is expected to continue with the shutdown behind us, though. Manufacturing in the Philadelphia region remained strong in October, beating estimates with a 19.8 reading on the Philadelphia Fed Index. New orders was an area of particular strength. Later today, there will be a few Fed insiders speaking, but that should be of little consequence at the moment.
 
Now that the government is back to work, the next big event will be the overdue release of the jobs report, now 2 weeks overdue. It is likely that will come next week, as it was delayed very shortly into the shutdown, meaning that the work on the report was mostly complete. Today’s trade shows MBS prices have improved significantly, moving prices up over 100 basis points from where we were before the deal yesterday. The 10-year Treasury yield is also down significantly, touching 2.60% for the first time in months. Markets reacted to the deal differently than I had anticipated, mostly due to the highly temporary nature of the improvement. Basically, the deal we have guarantees we’ll see the same debate unfold in 13 weeks, although it will be a tougher battle for Republicans given the outcome of the most recent negotiation. It does finally free us to look beyond the fiscal concerns and back to data, which should start to flow again soon. There is definitely a shift in trading bias now, and we could see a bit more improvement in prices, especially if we get some weaker data next week. There is finally a little room to float, for the moment.
 
<15 days: lock
15-30 days: consider locking
30-45 days: consider floating
45+ days: float

Progress in Washington

October 16, 2013 by · Leave a Comment 

Friday’s trade showed a complete lack of conviction from traders, with MBS prices opening to initial strong gains, only to settle back down to a slight loss on the day. The gains weren’t justified in any data, having occurred well before the only released data point of the day, consumer sentiment, which showed pessimism. The debt ceiling / government shutdown debate continued, with no meaningful progress in any direction. The 10-year Treasury yield moved higher to 2.69% on optimism for a debt deal. 

Inflation in India picked up in September, rising to 9.84%, as that nation continues to struggle with price acceleration and declining growth. While the economy there is still moving at a healthy growth pace, recent leadership decisions have done little to alleviate concerns. Eurozone financiers have told Greece it needs to find an additional €2 billion in savings in order to meet its austerity targets. The nation currently faces an anticipated shortfall of €5-6 billion in its 2014 budget that is unlikely to be filled by new borrowing. Portugal is weighing options to extend maturity on some of its upcoming debts, looking at swapping out maturing issues for new bonds not due for a few more years. Portugal hasn’t had normal access to debt markets for several years, and is facing a 2015 wind-down of its bailout financing. Germany’s ZEW index of investor confidence rose in October, up over 3 points to 52.8, suggesting that traders of German securities are confident about the direction in which that nation’s economy is headed. Bonds there, though, are weaker today on speculation about a US debt ceiling deal. Consumer prices in France were confirmed as falling 0.2% in September in a follow-on reading for that measure. Industrial Production in Europe grew a bit faster than anticipated in August, up 1%, although year-over-year growth still significantly negative. Influential international news is very limited this week. 

Who knows what data we will or will not get this week, given the ongoing, now 15 day long, government shutdown. Not only has the shutdown delayed the release of the September Jobs report, the survey for the October report was due to be conducted this week, and will likely delay that report’s coming in November. Here’s a rundown of this week’s data schedule: 

Monday: bond markets closed
Tuesday: Empire Fed Index
Wednesday: Atlanta Fed Index, Housing Market Index, Beige Book
Thursday: Housing Starts*, Jobless Claims, Industrial Production*, Philadelphia Fed Survey
Friday: Leading Indicators*may be cancelled if shutdown continues

Overall, this is a relatively quiet week for data, freeing traders to focus on the looming debt ceiling negotiations. If we do have a solution relatively soon, it is possible we might get late releases for some of the reports delayed in previous weeks due to the shutdown. Today’s sole indicator, the Empire State Manufacturing Survey, has shown weakness that is tentatively being blamed on the government shutdown. The index fell to 1.52 from its previous reading at 6.29, meaning that manufacturing is still growing, but at a much slower pace. 

Markets aren’t trading on data today, because there really isn’t much of that to go around. Instead, they’re handicapping the possibility of a debt ceiling solution, and, from what they’re doing at the moment, it doesn’t appear they think it will happen today, although tomorrow isn’t out of the question. MBS prices started the day down sharply, but have recovered to essentially unchanged since then, with MBS down just 2 basis points, while the 10-year Treasury yield is up just 0.01% to 2.70%. Remember that a good chunk of pricing is currently based on the debt ceiling concern. When that is fixed, rates will worsen, and, given the looming deadline, the likelihood of a fix is increasing. House Republican leaders are expected to give a news conference shortly to further the debate and announce results of a closed-door meeting they held this morning. At the moment, there’s no reason to be floating anything, as a debt ceiling breach is highly unlikely. 

<15 days: lock
15-30 days: lock
30-45 days: lock
45+ days: consider locking

Measurement of Industrial Activity

October 11, 2013 by · Leave a Comment 

Optimism over a possible debt limit deal pressured MBS prices in early trade yesterday, but the losses were short lived, running out at the end of the day as rates improved to close flat with Wednesday’s trade. US data would have proven beneficial for pricing in a normal environment, but that isn’t where we’re at; 374,000 unemployment claims, a rise of 66,000 from the prior report, went largely unnoticed and ignored, as much of those changes are due to the government shutdown. Rhetoric in Washington softened slightly, suggesting that a solution to the debt ceiling may be on the way. MBS prices closed with a loss of just 1 basis point in price, while the 10-year Treasury couldn’t shake off early losses, pushing its yield higher to 2.68%.

August growth in Industrial Production for India was disappointing, posting just a 0.6% gain, where 2% had been anticipated. Remember Cyprus? That nation has remained firmly entrenched in recession following the weakness induced by the near-collapse of its banking sector earlier in 2013, and its 2014 draft budget shows lawmakers cutting spending a further 10% from levels that already have the nation mired in a deep recession. Large rises in unemployment are expected to continue. Greece’s failing economy, the struggles of which caused Cyprus’ difficulties by weakening the value of Greek bonds, is expected to see an on-target deficit reduction for 2013, putting it into position to have a primary surplus on the year, meaning that, excluding debt servicing costs, interest, it covers its expenses. Figures through September are well below targets in terms of the deficit. Consumer Prices in Italy confirmed an earlier reading in a subsequent follow up analysis, falling 0.3% in September and up just 0.9% in the past 12 months. The same can be said for Germany, where prices were flat in September and up 1.4% in the past year.

The government shutdown ate three more economic reports today, Retail Sales, Business Inventories and the Producer Price Index. Retail Sales could have been of significant influence to pricing. Consumer Sentiment fell in the preliminary October reading, down 2.3 points to 75.2, likely reflecting serious concerns about the impact of the government shutdown. Current conditions were seen as relatively strong, but expectations are poor, reflecting the lack of faith in the nation’s leadership. Markets are in pure speculation mode right now due to the profound lack of data and leadership, although it appears we may have some progress there soon.

MBS prices opened the day stronger, posting as much as a 28 basis point gain on very limited news, bringing pricing near its best point for the week. There’s no real justification for this, it’s just a gift. News currently suggests that there will be a debt ceiling solution, albeit perhaps a temporary one, sooner rather than later, so it is best to be locked in almost all circumstances at the moment. Next week’s data contains who knows what, depending on what gets released, but on the schedule are a Bernanke speech Monday, and several measurements of industrial activity produced by the Fed and regional banks, all of which should successfully occur shutdown or not. There’s no upside to floating right now. We’ve gotten lucky the last 3 days that pricing has improved, but it will worsen when government restarts. I’m even a little concerned about floating through to Tuesday (markets are closed Monday for Columbus Day) due to the amount of time that gives Obama and Boehner to patch things up.

<15 days: lock

15-30 days: lock

30-45 days: lock

45+ days: consider locking

Forecasting the Return of the Government

October 10, 2013 by · Leave a Comment 

Pricing started the day around unchanged yesterday, and moved a bit during the day, flirting with reprices in either direction before closing 9 basis points lower than its prior close. The 10-year Treasury auction was a bit weaker than recent results, while the Fed Minutes showed belief that markets would be able to absorb tapering if concerns about government shutdown and the debt ceiling debate weren’t present. Janet Yellen’s nomination to the Chair at the Federal Reserve went as anticipated. MBS prices wound up losing 9 basis points on the day, while the 10-year Treasury closed higher at 2.65%.

Japan’s Tertiary Index, essentially a leading economic indicator, posted a 0.7% gain in August, slightly better than expectations. Service industries were areas of particular strength. Machine orders for August in Japan were exceptionally strong, up 5.4%. Unemployment in Greece rose again in July, up to 27.6%, currently the world’s highest unemployment rate. The government doesn’t anticipate meaningful improvement until 2014. Industrial production in Italy fell in August, dropping 0.3% on the month, where a 0.7% gain had been anticipated. The data may have been weaker than it needed to be, though, as energy production took a lion’s share of the decline, while most other industries posted modest gains. In France, those figures were also worse than expected, 0.2% versus a predicted 0.5% gain, and again there energy was a weak spot.

We have actual US data today, in the form of unemployment claims, and this time, we’re seeing some influence from the government shutdown. Claims rose sharply last week, up 66,000 to 374,000, reflecting two factors: layoffs from non-government employers anticipating lower demand due to the shutdown, and the unwinding of some of the influences that California’s technology changeover has had on claims numbers the past few weeks. Federal employees may hit claims data next week, due to the lagging nature of this data. Import and Export pricing data was cancelled by the shutdown. The 30-year Treasury auction was a bit stronger than the 3- and 10-year auctions earlier this week.

MBS prices started today sharply weaker on the news this morning that there may be some progress between the parties in Washington that could lead to a government restart. The two sides are expected to meet tomorrow to discuss solutions, as we will then enter our 11th day of shutdown, with only 6 days to go before Treasury is unable to pay all its bills. I’ve been saying for a few days that there is no upside to floating. There still isn’t. Once the government shutdown is over, there will be a sharp drop in MBS prices, unless we’re talking about a temporary relief measure that comes with a limited time horizon. We’ll also have a big influx in data when the shutdown is over, which will include an employment report at a random, unpredictable time. There’s no reason to be floating anything that isn’t a short sale at the moment.

<15 days: lock

15-30 days: lock

30-45 days: lock

45+ days: consider locking

Limited Data and Poor Auction Impacting MBS Prices

October 9, 2013 by · Leave a Comment 

MBS prices sagged yesterday, suffering from limited data and a poor auction of 3-year Treasuries, although that end of the yield curve is suffering from the government shutdown more than the longer end. Rhetoric between the two ends of the National Mall continued with no apparent progress in sight. Stocks were hit very hard, with all major indices losing over 1%, and the NASDAQ off 2%. MBS prices lost 19 basis points, while the 10-year Treasury yield ticked slightly higher at 2.64%.

India’s trade deficit improved in September, falling to $6.7 billion from $10.9 billion in August. Export growth was very healthy, while imports fell sharply. The government there has been working to stem demand for gold, which has caused a significant foreign reserve drain on the country. German Industrial production grew faster than anticipated in August, up 1.4%, and prior results were upwards, too. Articles discussing the impact of a possible US default and the current shutdown on other countries are becoming more plentiful. To put it simply, it will be bad for everyone.

Today’s US data point, Wholesale Inventories, is delayed for the shutdown. We have two very significant events coming later today, though. Treasury will hold its last auction of 10-year notes prior to the October 17th insolvency date, and the minutes of the September Fed Meeting will be released. Both could have very significant influence on MBS prices, with the Fed Minutes likely to cause significant movement in prices, as it may reveal further insight into exactly why the Fed didn’t taper purchases of MBS or Treasuries at its most recent meeting. The 10-year Treasury auction is likely to do better than yesterday’s 3-year note auction, as the longer duration of the bonds is seen as putting their maturity beyond the current risk window. One more event due this afternoon is an announcement from the White House that Janet Yellenwill be the next Chairperson of the Federal Reserve. This is generally seen as a positive mover for pricing, as Yellen is less likely to aggressively taper asset purchases, however, the upside is limited because her nomination has been widely telegraphed in advance.

MBS prices are modestly better this morning, rebounding from yesterday’s weakness, with very little to influence them. Do expect some volatility in afternoon trade, though, as the auction results, the minutes, and the nomination all hit. The 10-year Treasury yield is very slightly higher today. As I’ve said before, there is no upside to floating at the moment. It will take data to move rates, and we just don’t have any of that right now. The next big event for rates may be an end to the shutdown and an extension of the debt ceiling, both of which are likely to cause rates to rise. It is best to be locked in wherever practical for now.

<15 days: lock

15-30 days: lock

30-45 days: consider locking

45+ days: consider floating

Unchanged Markets Anticipated

October 8, 2013 by · Leave a Comment 

Traders weren’t willing to keep their money in fixed income yesterday, in spite of a strong surge in early trading. Prices have remained in a very narrow range over the past few trading sessions, and yesterday was no exception. There was no data of consequence on the day; news about the government shutdown and debt limit debate dominated headlines with no progress whatsoever. Early trade in MBS was very strong, with prices up as much as 36 basis points, before settling down to essentially unchanged. The 10-year Treasury yield tried to move lower but failed, closing at 2.63%, just a shade below the prior close.

HSBC’s composite PMI fell in September, down 0.6 to 5.12, as services growth weakened modestly on the month. Manufacturing growth continued, though. Japan has joined the group of nations expressing dismay at the US government’s stalemate over debt repayment authorization, with a report indicating that several officials in Japan’s finance authority had placed emergency calls to the US Treasury Department. Japan and China each hold in excess of $1 trillion in Treasury debt. Greece has stated in its 2014 draft budget that it anticipates its economy to grow next year, for the first time since 2008, and might even see a small amount of jobs growth. Germany’s trade surplus grew for August, up €0.6 billion to €15.6 billion, as that nation continues to base its economic strength on exports driven by a comparatively cheap currency. Export growth on the month was particularly strong at 1%. Manufacturers’ orders there fell in August, surprising analysts who had expected a gain. France’s trade deficit fell in August to €4.9 billion.

Adding to the category of reports we’ve lost to the shutdown, the Commerce Department didn’t release data on US international trade for August today. You can also add the JOLTS report to that, the Job Openings and Labor Turnover Survey. At 1 PM Treasury will sell 3-year notes in its last week of authorized auctions; the proceeds will be used to refinance existing debt.

MBS prices are just a shade worse than unchanged today, as traders remain in limbo over the government shutdown and debt ceiling debate. MBS prices are 9 basis points worse than yesterday’s close, while the 10-year Treasury yield is up slightly at 2.64%. As the stalemate continues, traders are increasingly betting on nothing, the result of which is the continued fall in value of stocks and a general malaise gripping bond markets. There’s no reason to expect any change immediately, as there appears to be very little willingness from either side to capitulate to the other’s demands. There is no upside for floating loans right now; floats should really only be considered where the timing for closing is in question. There is a downside in that, if we do get resolution to the government shutdown, it will sap quite a bit of pricing from MBS. Tomorrow’s Fed Minutes will also be influential.

<15 days: lock

15-30 days: lock

30-45 days: consider locking

45+ days: consider floating.

Governmental Shutdown Continues

October 7, 2013 by · Leave a Comment 

MBS prices closed out Friday with a negligible change for the full week, as traders had very little to go on Friday, given that the Employment Situation Report was delayed due to the government shutdown. There was no data on Friday, and things were thinner last week due to the shutdown. As a result, MBS gained only 6 basis points on the week, while the 10-year Treasury yield was little changed, closing the week at 2.65%. 

China has become one of the first nations to jump on the “oh no, US, don’t default!” bandwagon. Vice Finance Minister Zhu Guangyao has implored the US to act towards resolution of the current controversy, which is seen as leaving the country unable to meet its obligations effective October 17th. Portugal received a small add-on loan from its international bailout, adding €5.5 billion to help that economy through the final stages of austerity measures intended to get it back on its feet. It is hoped this last installment will tide the nation through to its upcoming ability to borrow directly from markets. Overall Euro Area GDP was confirmed at a 0.3% gain from the 1st quarter in a revision to 2nd quarter data. Later this week we get manufacturing orders, industrial production, and CPI from Germany, along with a few important measurements of economic activity from France and Italy. 

In US data this week, we’ll have a mixed bag of reports and skipped reports as the government shutdown continues. We’re now 7 days into the shutdown with 10 days to go before Treasury can no longer defer payments. While there are no reports of consequence today, here’s what to expect for the rest of the week: 

Tuesday: no significant reports
Wednesday: Wholesale Trade*, FOMC Minutes
Thursday: Jobless Claims, Import and Export Prices*
Friday: Producer Price Index*, Retail Sales*, Consumer Sentiment, Business Inventories*
Items marked with a ‘*’ are published by government agencies, and may not be published due to the government shutdown. 

There was no progress towards any solution to the shutdown this weekend, so, with the debt ceiling looming next week, it appears ever more likely that the two debates will blend into one. MBS prices opened trade this morning significantly higher on weekend repositioning in foreign markets, and have worsened slightly since then, as it has become apparent to traders that they’re betting on air at the moment. There is no meaningful data, and most government reports will be delayed, so, until this nation’s government does what it is intended to and finds a mechanism by which to reopen government, there won’t be any progress. While we might get some benefits to MBS pricing from the continued shutdown, it is best to be locked in most situations, as we won’t get much more help on this, and movement in the right direction on the shutdown will be very damaging fro rates. The Fed minutes due Wednesday are sure to come and will certainly provide fodder to markets trying to reconcile last month’s decision not to taper. 

<15 days: lock
15-30 days: lock
30-45 days: consider locking
45+ days: consider floating

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