Intraday Credit Observations

People using "negative" proceeds from buying stuff to buy other stuff... Yes, one of those rare days where the money just comes out of nowhere and buys stocks, commodities, f/x and bonds all up at the same time.

So here are the results of magical money growing on trees:

10 Year UST:



30 Yr FNMA coupon (mortgages):



Major curve flattening:

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Mortgage Vigilantes Beating Death Drums

Even though the market's brief hiccup into green territory was promptly corrected (as expected earlier), it is the mortgage vigilantes' turn to beat the death drum. The 30 Yr Mortgage - 10 Yr UST spread is not helping the new, existing, and otherwise home sale green shoots. And this on top of the Treasury's $7 billion in Open Market purchases of bonds yesterday.

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We Have Mortgage Lift Off

The spread between mortgages and the 10 year just exploded...



But not because anyone is buying the 10 year.

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Intraday Credit/Mortgage Weakness

Equity markets may need to be reigned in a little - after the recent drop in mortgage rates and a steepening of the bond curve (thanks to a not insubstantial drop in equities), the S&P target makers may need to adjust the target for equities again. With the S&P running higher for the day, both the 2s10s is steepening and mortgages are starting to run wider. Time to take the market lower to see at what level we get a new equilibrium. Of course the best outcome, would be to find at what price level the S&P can be gently nudged higher without corresponding leakage in mortgages and bonds.



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Just A Tad Choppy

We hope mortgage traders brought their dramamine today. All is smooth and gentle in the 10 yr UST - 30 Yr Mortgage spread market.

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End Day Hi-Vol Indications Of Interest, Mortgages Still Rich To Quite Rich

Looks like not even Lloyd can take on mighty Jamie and his ravenous ETF hoovermatic: today migrating from boring old SPY to the uber-insane IWM. Just a reminder for Jamie's unmovable bastion of ETF fortitude: here is Lloyd's message - loud, clear and in 360x280 pixels. Bid the market against "the machine" at your own peril.



In the meantime, IWM 10 day volatility has quietly dropped to pre-Lehman levels.



Quants apparently had quite a field day, releveraging into any dip, and throwing IWM-based feces at each other.



As for that delayed mortgage refi: looks like today won't be the day either.



In the meantime after today's excuse for a 10 Yr UST auction, the inflation adjusted 10 Year has stormed back to December 2007 levels.



hat tip DistressedVolatility Sphere: Related Content

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Negative Convexity Pain Preparing To Go Orbital

Update: mortgage spread to 10 year just spiked to 111 bps, up +5



The bond vigilantes about to start the real pounding of the negative convexity trade. Mortgages can't catch a break. In the 5 seconds since you clicked on this, not one short sale or refi was executed.

Also, with auctions for $19 billion in 10 years on Wednesday and $11 billion in 30 years on Thursday (not to mention $35 billion in 3 years tomorrow), this week's MOVE chart should be a fun one to watch.




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The Mortgage Refi Trade Is Over

If, like Bob Pisani, you refied a week ago at 4.7%, congrats. If not, tough luck. Vigilantes check to you Mr. Bernanke.

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Mortgages Blowing Wider Again

Mortgage vigilantes out in full force today, calling Bernanke's bluff. Spread to 10 Years galloping fast as well.



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