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Market Commentary

Market Commentary

December 29, 2014
10-YEAR NOTES   100-08 (+08.5)
FN 3.5% COUPON   104-01.5 (+04)
SUPPORT   2.42%
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We have a light calendar this week with data on House Prices, Home Sales and ISM Manufacturing. The Dallas Fed Manufacturing Survey posted 10.8 in September, 10.5 in October and 10.5 again in November. For December the Dallas Fed Manufacturing Survey is expected to slip to 9.0.
On Friday, the coupon stack compressed, tightening roughly +1 tick in the production coupons, and MBS outperformed treasury hedges by 1½- 2½ ticks. The curve continued to bull flattened with 2s10s down -0.5 bps to 151.3, pulling the 20-day average to 159.9. The long-end rose for the second consecutive day, with the 30-Year bond yields down -2 bps to 207, on expectations that Inflation will remain below the Fed's target rate despite the recent indications that the US economy is expanding. The 30-Year current coupon declined -2.0 bps on the day to 2.89% and the 15-Year followed suit, down -2.0 bps to 2.14%. The G2/FN swap was mostly flat, rising only in the G2/FN 3.5 swap to 0-23.125 vs. 0-22.75 prior.
This Week's Events:
12/29 Dallas Fed Manufacturing Activity 07:30 December 9.0 - 10.5 -
12/30 S&P/Case-Shiller House Price Index YoY 06:00 October - - 4.81% -
12/30 Consumer Confidence Index 07:00 December 93.9 - 88.7 -
12/31 Initial Jobless Claims 05:30 December 27 290K - 280K -
12/31 Continuing Claims 05:30 December 20 2365K - 2403K -
12/31 Pending Home Sales MoM 07:00 November 0.5% - -1.1% -
01/01 Market Closed - - - - - -
01/02 Manufacturing PMI 06:45 December F 54.0 - 53.7 -
01/02 Construction Spending MoM 07:00 November 0.4% - 1.1% -
01/02 ISM Manufacturing 07:00 December 57.5 - 58.7 -
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