rate vol hits mtg apps; delta DIMS view; infra battle, OER calculation change comin' ...
got 20s?
THIS MORNING, I cannot help but TRY and contextualize Q2 rates rally (been down so long they look UP today) as we head in TO this afternoons 20yr auction.
Q2 has seen 20s go from ~2.30 down TO ~1.75 and in the process, stopping out much of the Sell Side who’ve been suggesting rates can ONLY go up.
NEWS: Rates VOL the cause of 4% drop in mortgage apps (CNBC); Delta dims GLOBAL V-covery outlook (RTRS); INFRA, debt ceiling, MESSY (Crapo, RTRS) and I’ve saved best for last as much of the INFLATION NOT TRANSITORY argument based on RENTS so kindly see MNI interview w/Cleveland Fed econ (Verbrugge) who SAYS BLS may CHANGE CPI calc BECAUSE of the rent skew. If the data don’t fit, you must … oh, nevermind. For MORE see My View and FT story link, US housing inflation: the sleeping giant that might tip the Fed’s hand
Technicals: 20yy auction levels to watch (1.87 supp) with loads of bearish hammer patterns and traded out BEARS.
My Views: look, I’ve not much MORE to add TO bull v bear debate - see this weekend, yesterday for more and TODAY I bring forward note from The Terminal on how, Overseas Treasury Buying Is AMPLIFYING Domestic SHORT COVERING...the recent Treasury rally has come almost entirely during European hours, with more than half occurring prior to the U.S. open. Asia and U.S. hours have generally experienced more modest yield moves … Also check out WSJ on how JayPOW NOT a lock (and online story just beneath is a visual of BRAINArd).
Sell Side Observations -- are a chronicling of the stop hunt -- TODAY I’ve recapped BNP (G10 Rates, stops REACHED) and TD getting stopped OUT of 10s vs Bunds (offset with 5yy LONG profits being booked). I’d ALSO highly recommend Barclays stock jockey writeup on hedging further growth scares -- essentially suggests buying SPX PUTS funded by OTM TLT calls … SO, risk OFF = HIGHER UST yields? Why NOT if a super duper HAWKISH FED=bullish flattening?