quick update in otherwise boring market: highlight is CB buying MBS….(Wednesday)

Markets trade quietly overnight, with little fanfare ahead of the US open. With the whole show in Washington and London, not to mention quarter end funding issues, most accounts seem to have taken to the sidelines for the last few days of the quarter. As of 8:15 AM ET, Treasuries were .5-1 bps higher in yield than the 3 PM ET marks, with curve flatter. US equity index futures are basically flat ahead of the cash open.

Another day with not much to write about, given how funding issues have locked up the market for the last week plus. And that fear doesn’t look to ease much as GC over the quarter end traded 4% yesterday, 3.5% late in the session. But what would you expect when the the Fed’s 14-day repo was 2x oversubscribed yesterday? Fed will continue to prime the pump today and through the quarter end, but don’t be surprised if you see the amount grow higher than the current $75BN scheduled each day if demand remains the same today, as we get closer to 30 September on Monday.Only other point worth making is that after 7 sessions of solid Japanese real money buying during the Asian session since 12 September, we hear the same accounts were better to sell Monday night (first day back from long weekend) and this past evening in US 5s and 30s, in both cases taking profits ahead of quarter end. Interesting that Asian banks were better buyers of 5s to unwind some hedges with (highlight here) Asian central banks a bit more active in buying MBS and 5s, a bit more aggressively than Monday night. Part of that stems from dovish BoJ minutes, and part of it stems from Kuroda comments about keeping back-end yields up to stave off deflationary pressures.


That will do it for now, maybe have something more to write about tomorrow, but don’t hold your breath. New home sales, along with Evans, George, Brainard, and Kaplan chatting it up. Fed repo operation at 8:30 AM ET, which can be used to fund $18BN in 2y FRN notes at 11:30 AM ET and $41BN in new 5s at 1 PM. Neat how this works….