Results of today’s 10 year note auction just hit the tape. 21 billion of the little beauties crossed the screen to yield 3.499% with 53% going to Indirect Bidders (strong buying). Bid to cover was 3.32% to 1, well above the average of 3.07% to 1 and just to show you how well subscribed it was, the issue traded through the screen by 2.4 bps. In other words, many traders wanted it but just didn’t get in on the action. Give it an A. The strong auction probably got a boost from continued geo-political concerns. As we speak, reports are flying about an oil terminal being bombed by Libyan aircraft. It just gets crazier over there. In other news, MBA Mortgage applications picked up last week, jumping 15.5%. Wholesale Inventories were also released, up 1.1% to the highest level since November 2008. This projects a positive sign for Factory Orders down the road. Technically, we’ve been in a tight range with very little price movement. The “inside day” is an indication of a Goldie Locks market where both buyers and sellers are in harmony. We have talked about this kind of a pattern before, one that’s called a triangle formation. The market tends to wind tighter and tighter will little movement until we reach the apex where a “breakout” occurs. The breakout should happen within a few days. The question will be what direction. For now, the 10 year note is up 14/32’s (yield 3.49%), mortgage backs up 6/32’s (we priced plus 3/32’s), and stocks are a mixed bag, up 19 points on the big board and down 11 on the Naz.
Scott Eggen
SVP, Capital MarketsPrimeLending, A PlainsCapital Company
18111 Preston Road, Suite 900Dallas, Texas 75252
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