MBS Pricing Snapshot

Existing-home sales were down in March but continue to outpace year-ago levels, while inventory tightened and home prices are showing further signs of stabilizing, according to the National Association of Realtors.

Total existing-home sales1, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, declined 2.6 percent to a seasonally adjusted annual rate of 4.48 million in March from an upwardly revised 4.60 million in February, but are 5.2 percent above the 4.26 million-unit pace in March 2011.

Lawrence Yun, NAR chief economist, said the recovery is in the process of settling into a higher level of home sales. “The recovery is happening though not at a breakout pace, but we have seen nine consecutive months of year-over-year sales increases,” he said. “Existing-home sales are moving up and down in a fairly narrow range that is well above the level of activity during the first half of last year. With job growth, low interest rates, bargain home prices and an improving economy, the pent-up demand is coming to market and we expect housing to be notably better this year.”

Total housing inventory at the end of March declined 1.3 percent to 2.37 million existing homes available for sale, which represents a 6.3-month supply2 at the current sales pace, the same as in February. Listed inventory is 21.8 percent below a year ago and well below the record of 4.04 million in July 2007.

*Headline 8.5 vs 12.0 consensus, 12.5 in March
*New orders lowest since September
*Headline lowest since January

Manufacturing firms responding to the April Business Outlook Survey indicated that regional manufacturing activity expanded modestly this month. The survey’s broad indicators for general activity, new orders, and shipments all remained positive but fell slightly from their readings last month. The indicator for current employment, however, showed a notable improvement. Price pressures were only slightly more widespread this month. The survey’s broad indicators of future activity remained at relatively high readings, and firms were more optimistic about their plans for hiring over the next six months.

30-year fixed-rate mortgage (FRM) averaged 3.90 percent with an average 0.8 point for the week ending April 19, 2012, up from last week when it averaged 3.88 percent. Last year at this time, the 30-year FRM averaged 4.80 percent.

15-year FRM this week averaged 3.13 percent with an average 0.7 point, up from last week when it averaged 3.11 percent. A year ago at this time, the 15-year FRM averaged 4.02 percent.

5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.78 percent this week, with an average 0.7 point, down from last week when it averaged 2.85 percent. A year ago, the 5-year ARM averaged 3.61 percent.

1-year Treasury-indexed ARM averaged 2.81 percent this week with an average 0.6 point, up from last week when it averaged 2.80 percent. At this time last year, the 1-year ARM averaged 3.16 percent.

Spain!!! You let us down!

There was a glimmer of hope that last night's Spanish 10yr bond auction would stir markets to move with more determination toward one side of their recent, very narrow range. But alas, the demand was higher-than-previous--as expected, but the yield sort of offset that, coming in at 5.743 vs 5.403 last time.

Bond markets hit the NY session FLAT! It wasn't until Jobless Claims at 8:30 that Treasuries and MBS were able to eek out some moderate improvements, but please allow us to emphasize just how far short these gains have fallen from challenging the best levels on 4/16. There has been no test of the recent range, and nothing to indicate that TSYs or MBS want one.

So we continue to assume what the actually want is the additional clarity afforded by next week's FOMC Announcement. Without a range break today, this week continues to exhibit one of the narrowest weekly trading ranges on record.

Narrow or not, today is better than yesterday so far. MBS are up 2 ticks in Fannie 3.5 coupons to 103-18 and 10yr yields are down just over a bp to 1.9612. Volume is much better than yesterday, but not "epic," and has been declining since the Jobless Claims pop. Noticeable bounce at 1.95% in 10yr yields, setting up a clear resistance target if we rally any more today.

*claims 386k vs 370k consensus
*Previous month revised from 380k to 388k
*4-week average rose to 374750 from 369,250

In the week ending April 14, the advance figure for seasonally adjusted initial claims was 386,000, a decrease of 2,000 from the previous week's revised figure of 388,000. The 4-week moving average was 374,750, an increase of 5,500 from the previous week's revised average of 369,250.

The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending April 7, unchanged from the prior week's unrevised rate of 2.6 percent.

The advance number for seasonally adjusted insured unemployment during the week ending April 7 was 3,297,000, an increase of 26,000 from the preceding week's revised level of 3,271,000. The 4-week moving average was 3,317,750, a decrease of 21,500 from the preceding week's revised average of 3,339,250.