MBS Pricing Snapshot

Pending home sales increased in March and are well above a year ago, another signal the housing market is recovering, according to the National Association of RealtorsÒ.

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, rose 4.1 percent to 101.4 in March from an upwardly revised 97.4 in February and is 12.8 percent above March 2011 when it was 89.9. The data reflects contracts but not closings.

The index is now at the highest level since April 2010 when it reached 111.3.

Lawrence Yun, NAR chief economist, said 2012 is expected to be a year of recovery for housing. “First quarter sales closings were the highest first quarter sales in five years. The latest contract signing activity suggests the second quarter will be equally good,” he said.

“The housing market has clearly turned the corner. Rising sales are bringing down inventory and creating much more balanced conditions around the county, which means home prices will be rising in more areas as the year progresses,” Yun said.

30-year fixed-rate mortgage (FRM) averaged 3.88 percent with an average 0.7 point for the week ending April 26, 2012, down from last week when it averaged 3.90 percent. Last year at this time, the 30-year FRM averaged 4.78 percent.

15-year FRM this week averaged 3.12 percent with an average 0.6 point, down from last week when it averaged 3.13 percent. A year ago at this time, the 15-year FRM averaged 3.97 percent.

5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.85 percent this week, with an average 0.6 point, up from last week when it averaged 2.78 percent. A year ago, the 5-year ARM averaged 3.51 percent.

1-year Treasury-indexed ARM averaged 2.74 percent this week with an average 0.6 point, down from last week when it averaged 2.81 percent. At this time last year, the 1-year ARM averaged 3.15 percent.

Economically speaking, global financial markets were feeling a bit queasy overnight after the European Commission reported weaker Economic Sentiment, Industrial Climate, Consumer Sentiment, and Business Climate. Negative quarterly reports from banks as weak earnings from Deutsche Bank set stocks on the path lower, with bond markets picking up the pieces. European 10yr Benchmarks led Treasuries lower into the NY open with weaker-than-expected Jobless Claims continuing that mission.

10's are down 5bps at 1.937 and Fannie 3.5 MBS are up 9 ticks at 103-24. This brings MBS and Treasuries roughly in line with their recent strongest levels from the beginning of the week.

Next scheduled data on tap is Pending Home Sales at 10am, followed by scheduled Fed "Twist" buying from 10:15 to 11:00am (2036-2042 maturities). But perhaps the most interesting item left of today's calendar is the 7yr Treasury Note Auction at 1pm.

We're not so much interested in the result itself (unless it's shockingly different than previous examples) as much as we're interested to see what is the net effect of this week's auction cycle being over. In that sense, even an average auction could have salubrious effects on the rest of the trading day.

* Previous week revised higher to 389k from 386k
* So claims are "lower" (cough!) to 386k this AM
* Widely tracked 4-week average at 381,750, highest since January 7, 2012

In the week ending April 21, the advance figure for seasonally adjusted initial claims was 388,000, a decrease of 1,000 from the previous week's revised figure of 389,000. The 4-week moving average was 381,750, an increase of 6,250 from the previous week's revised average of 375,500.

The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending April 14, unchanged from the prior week.

The advance number for seasonally adjusted insured unemployment during the week ending April 14 was 3,315,000, an increase of 3,000 from the preceding week's revised level of 3,312,000. The 4-week moving average was 3,311,750, a decrease of 9,750 from the preceding week's revised average of 3,321,500.