Agencies flat as investors protect books ahead of month-end, Friday's non-farm payrolls

By Kenneth Lim

Boston, March 30 - Agency spreads stayed put for another day as investors hunkered down on Wednesday ahead of the month-end and key payrolls data later in the week.

Bullet spreads closed flat on Wednesday on quiet trading.

"Agencies are pretty much unchanged on the day," one trader said. "I got to tell you, whenever it's before non-farm payrolls, there's just nothing happening."

Even callables had a muted session.

"We do a lot of short-end type stuff, and we're just having a slow time here," the trader said. "Usually there's a lot of interest in short-end callables, and I have problems getting people interested in long-end paper, but that's not surprising."

Treasuries recover

Although spreads did not move Wednesday, absolute yield levels slipped as the Treasury market halted its weeklong slide.

The Treasury's auction of seven-year notes found average success, one market source said.

"The auction went OK," the source said. "It wasn't a great auction, but I think it was better than the twos and the fives."

Yields retreated as investors decided to ease off of the relentless selling over the past week.

"I don't think there was really anything specific that led to today's rise," the source said. "It's probably technicals, a little bit of bottom feeding after all that selling, cutting back on the shorts in case Friday's payrolls don't turn out to be as strong as people were pricing in."

The other trader said the market was "very supportive" after the seven-year auction was not as bad as the week's two previous offerings. Month-end window dressing also helped prices.

"The market maybe saw a little bit of month-end buying today, which further supported the market," the trader said.

Quiet session

The trader said investors are unlikely to do much before Friday's non-farm payroll numbers and unemployment rate, but activity could pick up after the data.

The market source said yields could fall if payrolls "fall short of amazing," but could move higher into a new trading range if the data is strong.

"I think we're hovering at the high end of the range now, in terms of yield," the source said. "If yields get pushed higher, we're going to be trading in a new, higher range. If yields get pushed down, we're going to be back in the old range."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.