MBS Weekly Market Commentary Week Ending 9/21/2018

September 21, 2018

Stocks are hovering near all time highs in the AM as investors patiently await the rebalancing of major sectors.  The Global Industry Classification Standard will shuffle some internet and media stocks into a new distinction called “communication services.”  The restructuring will likely cause some headaches on the street as asset managers scramble to rebalance their respective holdings, especially with the end of Q3 looming in the distance.  The S&P500 is up almost 10% YTD, and is currently trading at 2,938.19, 0.25% higher.

Treasuries are essentially flat to begin Friday’s exchange after an initial selloff at the open.  It has been a rough and volatile week for USTs as investors prepare for a 25bp increase after the September 26th FOMC meeting.  Bloomberg currently has the odds of a hike pegged at 97.9%.  This week, the 2/10 spread has widened about 4bps, after notching a recent low of 18bps on 8/24.  The US 10-YR Note is currently trading at 3.0646%, 0.0020 higher. 

TBA MBS’ are holding steady in the early morning shuffle after a tumultuous week of trading.  Weaker-than-expected economic data did little to bolster TBA’s throughout the week, as the global equity rally remains at the forefront of investor attention.  All eyes will be on the FOMC this upcoming Tuesday/Wednesday as the US Central Bank gears up to raise interest rates for a third time in 2018.  Liquid coupons are currently trading 0+ – 1 tic lower.   

The USD is rallying hard in the AM, garnering most of its gains from the EUR and GBP after Theresa May characterized Brexit talks as “at an impasse.”  The DXY is currently trading 94.24, 0.36% higher.

Oil is moving higher in the early going as investors prepare for the Iranian sanctions to hamper supply.  WTI is currently trading at 71.14, 1.17% higher.