Higher, wider as supportive week beckons

Lower coupons should be fast approaching a sweet spot of sorts as supportive seasonal events again kick in with Friday's non-farm payrolls data deflating inflated Vols, while prepay factor releases (and reinvestments) precede that by one trading day.

This is all before Class A 48hour day kicks in next Tuesday (12th) for added MBS focus from the sizeable investing account base.

After dropping one point the past week, with bonds losing that FTQ edge as stocks and commodities soared, MBS enjoys a retreat to prices as well with the current coupon nudging higher nearly 20 basis points and the spread to treasuries falling back to the mid 80s.

As a consequence of a steeper curve to accompany the higher yields, 15/30s have rallied 10 to 20/32nds as well and are worth watching the other way if things settle in a bit ahead of NFP.

Overnight, stocks were fractionally mixed with no new headlines to bombard the markets and few fresh Greek debt rollover items to sort through. Major European stock markets are higher or lower 1/4 of one percent, while Asia closed mixed about the same as equities enjoyed a solid rally domestically last week.

US Treasuries added back a few ticks post-closing levels last week, with the 10yr note dipping back inside 3.20 yield, while the slope along the 2s/10s curve opens the week +270.

One month US Libor (MBS roll funding) starts out at 0.18505, and Friday's Daily Fed Funds Effective holds steady at 0.08 (Low 0.03, high 3-8th percent) with 3 basis points of standard deviation.

The economic calendar opens meekly today with only 10am factory orders for May, seen higher +1.0 against last reading down -1.2 percent. There are no major monetary policy speeches on tap so Fed Speak is muted while the Treasury is not auctioning off any notes and or bonds as we start July.

Copyright Reuters, 2011