Gimme Shelter

The bond market quaked again this morning and the ripples sent shock waves through the dollar currency crosses. A sleepy early price improvement came apart when chatter of MBS bid lists surfaced. Much like last month when the Chairman spoke, the market did not hold up to a real seller.

The yield chase produced the usual suspects of low coupon junk and Payment in Kind hocus pocus but the dyspepsia always comes from the leverage. Institutional FI eaters had upped their allocations to "Alt Investments" under the easily digestible idea of other asset classes. But as the harsh reality of "Too much everything" and low Global GDP spoiled the commodity concept-again- the funds slipped into levered mortgage product. Skuttle today centered around one such practitioner getting tapped on the shoulder.

The amount of freak this sent through ccy markets was astounding. Starry-eyed teens in virtually any pair were hoping to ride a good lead into the Employment Report then split. No such luck. The carnage was deep and wide. Positions are noticeably reduced into the data. One player is still holding on and unhedged, its Uncle Ben and the crack team on the Open Market Desk. LSAP-ing TBA production is getting away from them. They need things to calm down and quick.


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