MBS Pricing Snapshot

MBS are down to their lows of the morning as a well-connected stock lever has been leading yields higher in the bond market. 10 yr TSYs rejected yet another move below mid 1.84's, and important long and short term technical resistance level.

Fannie 3.0s are unchanged on the day but down to to 103-19 from 103-24 earlier. Some lenders that priced just before 10am may already be considering negative reprices, but the chances are still small for now, for most lenders.

A break below yesterday's at 103-18 would be more probable reprice territory for lenders that were already out with rate sheets. We're keeping an eye on S&Ps for a break above yesterday's close (1514), and any concomitant reaction in Treasuries as early warning signs of such a move.

- ISM Manufacturing PMI 54.2 vs 52.5 Consensus
- Highest Since June 2011
- Employment Index 52.6 vs 54.0 in Jan
- New Orders 57.8 vs 53.3 in Jan
- Highest Since April 2011

Economic activity in the manufacturing sector expanded in February for the third consecutive month, and the overall economy grew for the 45th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

- Markit Manufacturing PMI 54.3 vs 55.2 preliminary reading
- Output 57.3 vs 58.1 prelim.
- New Orders 55.4 vs 56.4 prelim

The expansion of the U.S. manufacturing sector continued in February, although the rate of growth eased from January’s nine-month peak. At 54.3, down from 55.8 in the previous survey period, the final Markit U.S. Manufacturing Purchasing Managers’ Index™ was almost a full point below the earlier flash estimate of 55.2 but still consistent with a solid improvement in overall operating conditions.

Treasuries improved slightly at the start of the Asian session and weakened even more slightly, never making it back to Thursday afternoon's levels. The throng of EU economic reports was generally positive for German Bunds and US Treasuries though the latter finally met with resistance at the same mid 1.84's that provides the last two bounces of the week. 10's are currently 1.857.

MBS opened 4 ticks higher and have since given one back (+3 on the day at 103-22) as resistance in Treasuries (or is is support in equities futures? Maybe both) kicked in after the Incomes/Outlays report. Markit PMI just hit and was slightly weaker than expected, but no major reaction so far. Next major data at 9:55am with Consumer Sentiment, followed by ISM Manufacturing at 10am.

- Spending +0.2 vs +0.2 Consensus
- Income -3.6 vs -2.2 Consensus, biggest drop since 1993, reflects pumping up of bonuses/dividends in Dec and payroll tax holiday expiration in Jan , hence no pronounced reaction in bond markets or equities futures

Personal income decreased $505.5 billion, or 3.6 percent, and disposable personal income (DPI) decreased $491.4 billion, or 4.0 percent, in January, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $18.2 billion, or 0.2 percent. In December, personal income increased $353.4 billion, or 2.6 percent, DPI increased $325.7 billion, or 2.7 percent, and PCE increased $14.8 billion, or 0.1 percent, based on revised estimates.

Personal outlays -- PCE, personal interest payments, and personal current transfer payments -- increased $22.0 billion in January, compared with an increase of $13.3 billion in December. PCE increased $18.2 billion, compared with an increase of $14.8 billion.