MBS Live: MBS Morning Market Summary
Bond markets, including MBS, opened in weaker territory this morning and continued losing ground in spite of a weaker-than-expected Durable Goods report. Volume spiked and things bounced back somewhat just before 9:30am, leaving MBS and Treasuries roughly in line with their 8am levels. The fact that Fannie 3.5 MBS are down 2 ticks day-over-day is a bit misleading as they lost a quick 4 ticks yesterday afternoon. That makes current prices about 6 ticks lower than the majority of yesterday's range, which would tend to justify at least a 25bp change in rate sheets among lenders who didn't reprice for the worse yesterday afternoon. The 5yr Treasury Note Auction is coming up at 11:30am, earlier than normal to make room for the afternoon's FOMC events.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
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Morning Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts and updates issued via email and text alert to MBS Live subscribers this morning.
9:08AM :
ALERT ISSUED:
Bond Markets Weaker Following Durables Data. Wait, What?
At first blush, this might seem like somewhat of a paradoxical reaction. We have much weaker-than-expected economic data and bond markets are not only "not improving," but one might even say they're struggling a bit this morning.
First of all, we should be clear on the point that none of yesterday afternoon's or this morning's weakness has anything to do with Apple earnings. The movement just doesn't line up with the time. Bond markets then opened slightly weaker this morning due to a moderate dose of "risk-on" trading in Europe.
The only really interesting thing that's happened is that they continue to trade in weaker territory even after a super weak Durable Goods report--no normal behavior. Even then, we're not too sure it's "interesting" given that which has already been said about today's other events. In fact, the paradoxical reaction simply strengthens the sense that markets are waiting on the FOMC--something they've been doing for weeks now.
There's no doubt some traders tried to push yields lower after the data, but just as many stepped in front of that trade and said "not so fast! FOMC is coming up this afternoon and there's a 5yr auction to take down ahead of time. We'd rather keep things right where they are, or higher, and no, we don't care that Durable Goods were weaker." Guess who won.
10yr yields are currently at 1.998, having risen about a bp since Durables and MBS are 3 ticks lower on the day at 103-13. Refer to "The Day Ahead," for more thoughts on the range, as well as the one where downplayed the importance of this morning's data in favor of FOMC events later in the day.
The only really interesting thing that's happened is that they continue to trade in weaker territory even after a super weak Durable Goods report--no normal behavior. Even then, we're not too sure it's "interesting" given that which has already been said about today's other events. In fact, the paradoxical reaction simply strengthens the sense that markets are waiting on the FOMC--something they've been doing for weeks now.
There's no doubt some traders tried to push yields lower after the data, but just as many stepped in front of that trade and said "not so fast! FOMC is coming up this afternoon and there's a 5yr auction to take down ahead of time. We'd rather keep things right where they are, or higher, and no, we don't care that Durable Goods were weaker." Guess who won.
10yr yields are currently at 1.998, having risen about a bp since Durables and MBS are 3 ticks lower on the day at 103-13. Refer to "The Day Ahead," for more thoughts on the range, as well as the one where downplayed the importance of this morning's data in favor of FOMC events later in the day.
8:35AM :
ECON: Durable Goods Report Much Weaker Than Expected
*Durable Goods Orders -4.2 vs -1.7 consensus
New orders for manufactured durable goods in March decreased $8.8 billion or 4.2 percent to $202.6 billion, the U.S. Census Bureau announced today. This decrease, down two of the last three months, followed a 1.9 percent February increase. Excluding transportation, new orders decreased 1.1 percent. Excluding defense, new orders decreased 4.6 percent.
Transportation equipment, also down two of the last three months, had the largest decrease, $7.1 billion or 12.5 percent to $49.7 billion. This was due to nondefense aircraft and parts, which decreased $7.7 billion.
New orders for manufactured durable goods in March decreased $8.8 billion or 4.2 percent to $202.6 billion, the U.S. Census Bureau announced today. This decrease, down two of the last three months, followed a 1.9 percent February increase. Excluding transportation, new orders decreased 1.1 percent. Excluding defense, new orders decreased 4.6 percent.
Transportation equipment, also down two of the last three months, had the largest decrease, $7.1 billion or 12.5 percent to $49.7 billion. This was due to nondefense aircraft and parts, which decreased $7.7 billion.
Live Chat Featured Comments
A recap of the featured comments from the MBS Live Dashboard's Live Chat feature, utilized by hundreds of industry professionals each day.
Adam Quinones : "easy to read and something to think about if you're young and making some aggressive investments."
Adam Quinones : "The Economist really summed it up well here: http://www.economist.com/node/21552901"
Matthew Graham : "indeed I do! whaddaya got?!"
Adam Quinones : "hey MG you know how I like to talk about productivity and humans losing jobs to automation/computers?"
Matthew Graham : "http://www.federalreserve.gov/newsevents/press/monetary/20120313a.htm"
Andy Pada : "didn't see that part on GDP and less likelihood in Fed comments or interview."
Matthew Graham : "the Fed mentioned GDP at 2%? I'm not sure I saw that part"
Andy Pada : "Would you say that recent news from Europe as well as domestic data have tempered that storm? Consequently, has the perception on the likelihood of QE3 changed?"
Mike Ford : "Andy, that was due to comments made by Fed regarding less likelihood of QE3 as long as GDP stays 2% as expected or higher, thus QE3 was more "off the table". "
Matthew Graham : "that's the leading candidate. but Greece had just been patched up as well. I think the phrase "perfect storm" was tossed around one time."
Andy Pada : "At the last Fed Meeting, there was a selloff in Treasuries and MBS. Was this a consequence of lowered expectations for QE3?"
Gus Floropoulos : "Just used the advanced charts to educate a client as to why rates are where they are today vs 3 months ago....thanks MBS Live"
Andrew Horowitz : "http://portal.hud.gov/hudportal/documents/huddoc?id=12-04ml.pdf"
Andrew Horowitz : "For all SF Forward Streamline Refinance transactions that are refinancing FHA loans endorsed on or before May 31, 2009, the Annual MIP will be 55 bps, regardless of the base loan amount. The endorsement date is on the Case Query screen in FHA Connection. This change is effective for case numbers assigned on or after
June 11, 2012."
Alan Craft : "It will help a lot of people that cannot benefit now due to increased monthly MIP"
Dan Clifton : "Tony, but it was announced? anyone have a link to the Mortgagee Letter?"
Andrew Horowitz : "starting in June"
Gaius Rossini : "yep - i wonder what the effect of that will be"
Tony Cardinal : "that doesnt go into effect until 06/11/2012 Dan and Gaius"
Dan Clifton : "andrew, did new streamline MIP get announced? i missed it if so"
Dan Clifton : "Gaius i dont think that new streamline guides ever happened, did they?"
Gaius Rossini : "what new streamline guides? the MIP reduction to 55 bps?"
Adam Quinones : "...too late!"
Andrew Horowitz : "they should start to sell off, considering the new streamline guides, those pools will be in the crosshairs"
Adam Quinones : "question is...is this just another one of those one-off months or should the street really be nervous. "
Adam Quinones : "not that you care but GN 5.0s and GN 5.5s are the talk of the town"
Matthew Graham : "RTRS - U.S. MARCH DURABLES EX-DEFENSE -4.6 PCT (CONS -0.5 PCT), BIGGEST DECLINE SINCE JAN 2009, VS FEB +1.5 PCT (PREV +2.0 PCT) "
Matthew Graham : "RTRS - U.S. MARCH DURABLES EX-TRANSPORTATION -1.1 PCT (CONS +0.5 PCT) VS FEB +1.9 PCT (PREV +1.8 PCT) "
Matthew Graham : "RTRS- US MARCH DURABLES ORDERS -4.2 PCT (CONS. -1.7 PCT), BIGGEST DECLINE SINCE JAN 2009, VS FEB +1.9 PCT (PREV +2.4 PCT)"
Matthew Graham : "weak data"
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