A major snowstorm hitting the East Coast on Friday was adding uncertainty to the mortgage-backed securities (MBS) markets. With fewer participants than Treasuries and stocks, MBS prices are more susceptible to volatility when events decrease overall participation. If Treasuries hold their ground, MBS prices should remain near intermediate support levels set from prices on Thursday afternoon. Broader bond markets also face recent weakness, leaving Treasury yields little room to rise before facing challenges, making it difficult to find major motivation on Friday.

1. Fri, Feb 8, 2013
The Day Ahead: Snowstorm Adds Uncertainty as
MBS Roll
chammond
BY MATTHEW GRAHAM Certified Mortgage
Planning Specialist
Mortgage Network, Inc
Friday was probably already going to be a wild card, but it's made even
more so due to the big, nasty snowstorm set to hit the east coast this
clint-hammond.com
morning. With major wind gusts and heavy snow accumulations
chammond@mortgagenetwork...
expected in New York, residents are already in somewhat of an orderly
panic mode with long lines at gas stations and bare shelves in some Phone: (803) 771-6933
supermarkets. It's a good time to remember that a lot of what happens Mobile: (803) 422-6797
day to day in financial markets is the result of actual people being at Fax: (803) 771-6944
work. Especially after Sandy, residents are on guard against the Facebook
weather, and it could keep more than a few market participants out of the
Twitter
game.
Linked In
It's also good to remember that MBS markets have fewer participants
than Treasuries and stocks. When something happens to decrease
overall participation, MBS prices are more susceptible to volatility. All things being equal, the session
is shaping up as something to be endured rather than eagerly traded. If Treasuries manage to hold their
ground, then MBS should be somewhere close to intermediate support. Here's where prices would be if
we'd rolled on Thursday afternoon (the actual roll, where February MBS are settled and March take over
as the new "front month" is after the close tonight).

2. In terms of broader bond markets, there's an unfortunate amount of recent context for weaker levels.
With 10yr Treasuries ending Thursday's session around 1.96, we have the major short term resistance
pivot at 1.953 and the longer term inflection point (the one we didn't break on NFP day) at 1.926. There's
plenty of room to run between 1.96 and 2.05 in the event of weakness whereas pressing into lower yield
levels gets challenging quickly without the appearance of major motivation. With potentially thin trading
conditions and the less-than-super-important Trade Balance and Wholesale Inventories data sets, finding
major motivation on Friday could be a challenge.
MBS Live Econ Calendar:

3. Week Of Mon, Feb 4 2013 - Fri, Feb 8 2013
Time Event Period Unit Forecast Prior
Mon, Feb 4
10:00 Factory orders mm Dec % 2.2 0.0
Tue, Feb 5
10:00 ISM N-Mfg PMI Jan -- 55.2 56.1
Wed, Feb 6
07:00 Mortgage market index w/e -- -- 822.1
07:00 Mortgage refinance index w/e -- -- 4415.2
Thu, Feb 7
08:30 Initial Jobless Claims w/e K 360 368
08:30 Productivity Revised Q4 % -1.2 2.9
15:00 Consumer credit Dec bl 12.50 16.05
Fri, Feb 8
08:30 International trade mm $ Dec bl -46.0 -48.7
10:00 Wholesale inventories mm Dec % 0.4 0.6
10:00 Wholesale sales mm Dec % 0.6 2.3
* mm: monthly | yy: annual | qq: quarterly | "w/e" in "period" column indicates a weekly report
* Q1: First Quarter | Adv: Advance Release | Pre: Preliminary Release | Fin: Final Release
* (n)SA: (non) Seasonally Adjusted
* PMI: "Purchasing Managers Index"
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