MBS Live: MBS Morning Market Summary
All things considered, there really hasn't been too much of a knee jerk reaction to this morning's jobs data. 10yr yields shot predictably lower and after bouncing back from their initial lows, never went any higher than pre-NFP yields, bouncing lower just under 1.51 around 9:35am. Things have been narrowing and consolidating ever since, and that's something that MBS can appreciate. Fannie 3.0's just edged to their highest levels of the day at 103-03 (a price that a mere month ago, wouldn't have been too bad for a Fannie 3.5!). As for 3.5's themselves, they just notched above their earlier high at 105-11. 10yr yields are at 1.4687 and stocks have been drifting back toward their morning lows.
The biggest story of the morning apart from NFP, is one that hasn't gotten much attention, but has caused BY FAR the biggest swing vs y'day's trading range. Shortly after NFP, rumors started circulating about a concerted central bank intervention over the weekend, involving at least the ECB if not others. Relative to yesterday's range, the Euro skyrocketed from multi-year lows this morning to almost a cent-and-a-half higher from 8:49am to 9:35am.
That's a gigantic move. Note the time of the bounce as well... Same time that Treasuries (and stocks for that matter) hit their highs....
Conclusion: we would have seen less indecision, and possibly even lower Treasury yields this morning had it not been for the intervention rumors. Expect further big moves ahead if the ECB comes out with any clarification for or against such an operation. For now though, markets have moved to discount it to a much greater extent than they had originally (discounting possible intervention, resulting in yields, Euros, stocks, falling back near previous levels, with all of the above being good for MBS, though a BREAK lower isn't great for MBS as it creates even more unwanted volatility).
The biggest story of the morning apart from NFP, is one that hasn't gotten much attention, but has caused BY FAR the biggest swing vs y'day's trading range. Shortly after NFP, rumors started circulating about a concerted central bank intervention over the weekend, involving at least the ECB if not others. Relative to yesterday's range, the Euro skyrocketed from multi-year lows this morning to almost a cent-and-a-half higher from 8:49am to 9:35am.
That's a gigantic move. Note the time of the bounce as well... Same time that Treasuries (and stocks for that matter) hit their highs....
Conclusion: we would have seen less indecision, and possibly even lower Treasury yields this morning had it not been for the intervention rumors. Expect further big moves ahead if the ECB comes out with any clarification for or against such an operation. For now though, markets have moved to discount it to a much greater extent than they had originally (discounting possible intervention, resulting in yields, Euros, stocks, falling back near previous levels, with all of the above being good for MBS, though a BREAK lower isn't great for MBS as it creates even more unwanted volatility).
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.
10:11AM :
ECON: Private Construction Spending Rises, Public Spending Falls
The U.S. Census Bureau of the Department of Commerce announced today that construction spending during April 2012
was estimated at a seasonally adjusted annual rate of $820.7 billion, 0.3 percent (±1.3%)* above the revised March
estimate of $818.1 billion. The April figure is 6.8 percent (±1.9%) above the April 2011 estimate of $768.2 billion.
During the first 4 months of this year, construction spending amounted to $238.5 billion, 7.3 percent (±1.6%) above the $222.2 billion for the same period in 2011.
PRIVATE CONSTRUCTION
Spending on private construction was at a seasonally adjusted annual rate of $549.7 billion, 1.2 percent (±1.3%)* above the revised March estimate of $543.4 billion. Residential construction was at a seasonally adjusted annual rate of $256.1 billion in April, 2.8 percent (±1.3%) above the revised March estimate of $249.1 billion. Nonresidential construction was at a seasonally adjusted annual rate of $293.6 billion in April, 0.2 percent (±1.3%)* below the revised March estimate of $294.3 billion.
PUBLIC CONSTRUCTION
In April, the estimated seasonally adjusted annual rate of public construction spending was $271.0 billion, 1.4 percent (±2.1%)* below the revised March estimate of $274.7 billion. Educational construction was at a seasonally adjusted annual rate of $68.3 billion, 0.9 percent (±5.0%)* below the revised March estimate of $68.9 billion. Highway construction was at a seasonally adjusted annual rate of $77.3 billion, 0.4 percent (±5.4%)* above the revised March estimate of $77.0 billion.
During the first 4 months of this year, construction spending amounted to $238.5 billion, 7.3 percent (±1.6%) above the $222.2 billion for the same period in 2011.
PRIVATE CONSTRUCTION
Spending on private construction was at a seasonally adjusted annual rate of $549.7 billion, 1.2 percent (±1.3%)* above the revised March estimate of $543.4 billion. Residential construction was at a seasonally adjusted annual rate of $256.1 billion in April, 2.8 percent (±1.3%) above the revised March estimate of $249.1 billion. Nonresidential construction was at a seasonally adjusted annual rate of $293.6 billion in April, 0.2 percent (±1.3%)* below the revised March estimate of $294.3 billion.
PUBLIC CONSTRUCTION
In April, the estimated seasonally adjusted annual rate of public construction spending was $271.0 billion, 1.4 percent (±2.1%)* below the revised March estimate of $274.7 billion. Educational construction was at a seasonally adjusted annual rate of $68.3 billion, 0.9 percent (±5.0%)* below the revised March estimate of $68.9 billion. Highway construction was at a seasonally adjusted annual rate of $77.3 billion, 0.4 percent (±5.4%)* above the revised March estimate of $77.0 billion.
10:07AM :
ECON: ISM Manufacturing In Line With Conensus
* ISM PMI 53.5 vs 53.9 consensus
*prives paid 47.5 vs 56.8 consensus
* New orders 60.1 vs 58.2 previously, highest since April 2011
The PMI registered 53.5 percent, a modest decrease of 1.3 percentage points from April's reading of 54.8 percent, indicating expansion in the manufacturing sector for the 34th consecutive month. The New Orders Index continued its growth trend for the 37th consecutive month, registering 60.1 percent in May. This represents an increase of 1.9 percentage points from April and also the highest level recorded by the index since April 2011. The Prices Index for raw materials fell to 47.5 percent in May, dropping 13.5 percentage points from April, indicating lower prices for the first time since December 2011. Comments from the panel generally reflect stable-to-strong orders, with sales showing steady improvement over the first five months of 2012.
*prives paid 47.5 vs 56.8 consensus
* New orders 60.1 vs 58.2 previously, highest since April 2011
The PMI registered 53.5 percent, a modest decrease of 1.3 percentage points from April's reading of 54.8 percent, indicating expansion in the manufacturing sector for the 34th consecutive month. The New Orders Index continued its growth trend for the 37th consecutive month, registering 60.1 percent in May. This represents an increase of 1.9 percentage points from April and also the highest level recorded by the index since April 2011. The Prices Index for raw materials fell to 47.5 percent in May, dropping 13.5 percentage points from April, indicating lower prices for the first time since December 2011. Comments from the panel generally reflect stable-to-strong orders, with sales showing steady improvement over the first five months of 2012.
9:03AM :
ECON: Income Falls Slightly But Spending Holds Steady
* Personal Spending +0.3 vs +0.3 consensus
* March Spending revised down to +0.2 from +0.3
* Personal Income +0.2 vs +0.3 consensus
* Core PCE +0.1333 vs +0.2 consensus
* Personal savings rate 3.4 vs 3.5 pct
Bottom line, this is a somewhat of a redeeming factor vs the ugly NFP, mainly because you have RELATIVELY more consumer spending (note the downtick in savings rate and the on-consensus spending figure in the face of a 0.1 pct downtick in income). In other words, and on another day without NFP reporting, this would be a net-positive for risk markets and a negative for bond markets, but clearly, not enough to offset NFP this morning.
Personal income increased $31.7 billion, or 0.2 percent, and disposable personal income (DPI) increased $22.0 billion, or 0.2 percent, in April, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $31.8 billion, or 0.3 percent. In March, personal income increased $52.2 billion, or 0.4 percent, DPI increased $45.9 billion, or 0.4 percent, and PCE increased $25.4 billion, or 0.2 percent, based on revised estimates.
Real disposable income increased 0.2 percent in April, the same increase as in March. Real PCE increased 0.3 percent in April, compared with an increase of less than 0.1 percent in March.
* March Spending revised down to +0.2 from +0.3
* Personal Income +0.2 vs +0.3 consensus
* Core PCE +0.1333 vs +0.2 consensus
* Personal savings rate 3.4 vs 3.5 pct
Bottom line, this is a somewhat of a redeeming factor vs the ugly NFP, mainly because you have RELATIVELY more consumer spending (note the downtick in savings rate and the on-consensus spending figure in the face of a 0.1 pct downtick in income). In other words, and on another day without NFP reporting, this would be a net-positive for risk markets and a negative for bond markets, but clearly, not enough to offset NFP this morning.
Personal income increased $31.7 billion, or 0.2 percent, and disposable personal income (DPI) increased $22.0 billion, or 0.2 percent, in April, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $31.8 billion, or 0.3 percent. In March, personal income increased $52.2 billion, or 0.4 percent, DPI increased $45.9 billion, or 0.4 percent, and PCE increased $25.4 billion, or 0.2 percent, based on revised estimates.
Real disposable income increased 0.2 percent in April, the same increase as in March. Real PCE increased 0.3 percent in April, compared with an increase of less than 0.1 percent in March.
8:49AM :
ALERT ISSUED:
ECON: Big Miss For Non-Farm Payrolls. 10yr Yields Into 1.4's!
* NFP +69k vs +150k expectations
* Previous NFP revised from +115k to +77k
* March NFP Revised from +154k to +143k
* Smallest gain since +54k in May 2011
* Unemployment 8.2 pct vs 8.1 pct consensus
Bottom line, this is a big miss for NFP. Read the implications regarding "Fedspectations" HERE.
Even the BLS has to try to spin this one in a positive light:
"Nonfarm payroll employment changed little in May (+69,000), and the unemployment rate was essentially unchanged at 8.2 percent, the U.S. Bureau of Labor Statistics reported today. "
Little changed from a HUGE DOWNWARD REVISION... and WAY OFF consensus. The fact that 10yr yields are trading at 1.45 is no surprise. If anything, we're surprised they're not trading a bit lower. MBS lagging the TSY rally is also no surprise. Fannie 3.0's doing much better than 3.5's as this NFP result implies increased market share for the former into the future. 3's are up 17 ticks at 103-02 and 3.5's are up 10 ticks at 105-10.
* Previous NFP revised from +115k to +77k
* March NFP Revised from +154k to +143k
* Smallest gain since +54k in May 2011
* Unemployment 8.2 pct vs 8.1 pct consensus
Bottom line, this is a big miss for NFP. Read the implications regarding "Fedspectations" HERE.
Even the BLS has to try to spin this one in a positive light:
"Nonfarm payroll employment changed little in May (+69,000), and the unemployment rate was essentially unchanged at 8.2 percent, the U.S. Bureau of Labor Statistics reported today. "
Little changed from a HUGE DOWNWARD REVISION... and WAY OFF consensus. The fact that 10yr yields are trading at 1.45 is no surprise. If anything, we're surprised they're not trading a bit lower. MBS lagging the TSY rally is also no surprise. Fannie 3.0's doing much better than 3.5's as this NFP result implies increased market share for the former into the future. 3's are up 17 ticks at 103-02 and 3.5's are up 10 ticks at 105-10.
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.
Brent Borcherding : "Oil is under $85 a barrel, too."
Victor Burek : "there wont be any printing. maybe more twist"
Brett Boyke : "Thats a huge gamble, gas and food prices are high enough now"
Brent Borcherding : "QE3 by September?"
Edgar : "Dax down nearly 4%"
Brent Borcherding : "Gonna be bloody in equities today, down 2+% in pre-market."
Matthew Graham : "I spent hours last night looking for historical examples of similar moves and didn't readily see a standout example of a sustained bounce in the other direction. Granted, I EASILY could have missed something, but I was sort of surprised to not find one."
Matthew Graham : "Greek elections 6/17, FOMC 6/20. = good degree of insulation from major bounce back (i'd hope)."
john murphy : "dangerous territory. i'm preparing for a violent snap. could see some smaller mortgage bankers go buh bye after this "
Matthew Graham : "yeah"
Ira Selwin : ""how come pricing isn't so much better?""
Ira Selwin : "I can hear it already "the 10 year is so low how come rates arent lower?""
Ira Selwin : "Not looking foprward to today"
Steven Stone : "yeah this is a screenshot day"
Christopher Stevens : "105 on 3.5 and 103 on 3.0 I want a picture of this to look at when rates are back at 5% in a few years"
Edgar : "I think you're right CS....the lenders we work with really don't need to lower rates as volume has drastically picked up the last few weeks. I just don't see lenders improving much when they don't have to."
Christopher Stevens : "banks can't handle current pipeline volume. They will have to either ramp up on employees or keep rates wherer they are"
Matthew Graham : "no, but more likely on the way now"
Victor Burek : "can we award current coupon to the 3.0 yet?"
Adam Quinones : "dont answer the phone today...might be a margin call."
john murphy : "all secondary market guys can take the day off..or at least stay away fom hi-rise windowws"
Steven Stone : ""sorry we already locked you in. imagine if rates got worse!""
Ira Selwin : "Yeh think Im gonna be sick today"
Matthew Graham : "MBS not a fan of volatility "
Oliver S. Orlicki : "mbs lagging to say the least"
Brent Borcherding : "It is a predictor of the pain ahead, as we had into the global recission again, Ira. Gonna be tough for a lot of people."
Matthew Graham : "RTRS - US APRIL PERSONAL SAVING RATE 3.4 PCT VS MARCH 3.5 PCT "
Matthew Graham : "RTRS- US APRIL CORE PCE PRICE INDEX 0.1 PCT (+0.1333; CONS +0.2 PCT) VS MARCH+ 0.2 PCT (PREV +0.2 PCT) "
Matthew Graham : "RTRS- US APRIL PERSONAL INCOME +0.2 PCT (CONS +0.3 PCT) VS MARCH +0.4 PCT (PREV +0.4 PCT) "
Matthew Graham : "RTRS - US APRIL PERSONAL SPENDING +0.3 PCT (CONSENSUS +0.3 PCT) VS MARCH +0.2 PCT (PREV+ 0.3 PCT) "
Matthew Graham : "RTRS- U.S. MAY NONFARM PAYROLLS GAIN SMALLEST SINCE MAY 2011 (+54,000) "
Matthew Graham : "RTRS - U.S. MAY JOBLESS RATE 8.2 PCT (CONSENSUS 8.1 PCT) VS APRIL 8.1 PCT (PREV 8.1 PCT) "
Matthew Graham : "don't miss: http://www.mortgagenewsdaily.com/mortgage_rates/blog/261513.aspx"
Jeff Anderson : "Wow. Cue up QE 3."
Bill Laffey : "almost 103 on the 3.0"
Victor Burek : "1.47 on 10yr!!!"
Scott Valins : "April revised down huge?"
Matthew Graham : "RTRS- US MAY PRIVATE SECTOR JOBS +82,000 (CONS +160,000), APRIL +87,000 (PREV +130,000) "
Andy Pada : "ew"
MMNJ : "Holy crap"
Matthew Graham : "RTRS- U.S. MAY NONFARM PAYROLLS +69,000 (CONSENSUS +150,000) VS APRIL +77,000 (PREV +115,000), MARCH +143,000 (PREV +154,000) "
Oliver S. Orlicki : "69k"
Bill Laffey : "wow"
Matthew Graham : "buckle up"
Victor Burek : "ugly"
Matthew Graham : "here we go"
Victor Burek : "gonna be under 100k"
MMNJ : "115K"
Victor Burek : "interest rates arent the problem..jobs is the problem"
Christopher Stevens : "is QE3 really being talked about? do we think a 10YR at 1 will help anymore than a 10YR at 1.51?"
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