MBS Pricing Snapshot

Now that the last of this morning's economic data is out, markets are showing their hand. The first few minutes into the 10am seemed like a frustrated and underdone attempt to rally on weaker data. Even though bond markets are now improving, it's taken 15 minutes to see more than a 1bp movement in 10yr yields or more than a tick in MBS prices.

The takeaway is that we're through the morning data with no major damage, but clearly lacking inspiration or conviction. If there's a tilt, it's slightly positive at the moment. Euros are in a consolidation pattern that could inform the next move for domestic markets if they see a technical break.

- Feb SFR Sales at 411k vs 422k consensus
- Last month revised slightly lower from 437 to 431
- Biggest detraction from headline: Northeast -13.3 pct
- Midwest +13.7, South -9.7, West -2.1

Sales of new single-family houses in February 2013 were at a seasonally adjusted annual rate of 411,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.6 percent (±20.4%)* below the revised January rate of 431,000, but is 12.3 percent (±23.3%)* above the February 2012 estimate of 366,000.

The median sales price of new houses sold in February 2013 was $246,800; the average sales price was $313,700. The seasonally adjusted estimate of new houses for sale at the end of February was 152,000. This represents a supply of 4.4 months at the current sales rate.

- 59.7 vs 68.0 Consensus
- Present Situation 57.9 vs 61.4 last month
- Expectations 60.9 vs 72.4 last month

The Conference Board Consumer Confidence Index®, which had improved in February, declined in March. The Index now stands at 59.7 (1985=100), down from 68.0 in February. The Present Situation Index decreased to 57.9 from 61.4. The Expectations Index declined to 60.9 from 72.4 last month.

The monthly Consumer Confidence Survey®, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a leading global provider of information and analytics around what consumers buy and watch. The cutoff date for the preliminary results was March 14.

Says Lynn Franco, Director of Economic Indicators at The Conference Board: “Consumer Confidence fell sharply in March, following February’s uptick. This month’s retreat was driven primarily by a sharp decline in expectations, although consumers were also more pessimistic in their assessment of current conditions. The loss of confidence, particularly expectations, mirrors the losses experienced this past December and January. The recent sequester has created uncertainty regarding the economic outlook and as a result, consumers are less confident.”

Data through January 2013, released today by S&P Dow Jones Indices for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, showed average home prices increased 7.3% for the 10-City Composite and 8.1% for the 20-City Composite in the 12 months ending in January 2013.

All 20 cities posted year-over-year gains with Phoenix leading the way with a gain of 23.2%. Nineteen of the twenty cities showed acceleration in their year-over-year returns. Despite posting a positive double-digit annual return, Detroit was the only city to show a deceleration. After 28 months of negative annual returns, New York came into positive territory in January.

Durable Goods Orders at 8:30am made for a brief pop of volume, but not much movement against what had already been a quiet overnight session. The trading range in Treasuries was exceptionally well-contained by yesterday's range, and that continues to be the case following Case Shiller Home Price data.

While trading volumes and volatility were light overnight, it wasn't for a lack of noise in Europe. Cypriot Banks will now be closed until Thursday with deposits over 100k likely to see a 30% haircut. When they reopen, capital controls will restrict what can be withdrawn, a state of affairs Cyprus' president says is "very temporary."

We got a laugh from a story on an IMF economist saying that central banks could grow too powerful, but given the generally soporific tempo of relevant information, it was one of the only interesting stories all night. Markets are either on Spring Break or waiting on Italian news, but clearly they're not "all here" today.

As for trading levels, Fannie 3.0 MBS are currently 3 ticks weaker from yesterday's close at 102-26 and have been in a 2 tick range between there and 102-25 all morning. 10yr yields are just under are nearly 2bps higher at 1.939 and have maintained a 1.92 -1.94 range most of the night (5's and 7's are noticeably weaker than the rest of the curve, in preparation for this week's auctions). S&P futures are up about 3 points from 4pm levels.

Next data is at 10am with Consumer Confidence and New Home Sales. The 2yr Treasury note auction at 1pm is a non-event. Other than that, we have to remain on the lookout for EU headlines, even if good examples have been hard to find so far.

- Headline Durables +5.7 vs +3.8 Consensus
- Excluding Transportation -0.5 vs +0.5 Consensus
- Excluding Defense +4.5 vs +0.5 Consensus - Ex-Defense and Aircraft -2.7 vs -1.2 Consensus
- Market Reaction: bond markets were at their weakest levels of the morning ahead of the report and have improved microscopically since then. Trading ranges are exceptionally narrow.

New orders for manufactured durable goods in February increased $12.4 billion or 5.7 percent to $232.1 billion, the U.S. Census Bureau announced today. This increase, up five of the last six months, followed a 3.8 percent January decrease. Excluding transportation, new orders decreased 0.5 percent. Excluding defense, new orders increased 4.5 percent.

Transportation equipment, up two of the last three months, drove the increase, $13.3 billion or 21.7 percent to $74.4 billion. This was led by nondefense aircraft and parts, which increased $9.0 billion.