MBS Pricing Snapshot

(Reuters) - Greece and its international lenders will renegotiate the program on which its second financial bailout is based because circumstances have changed, a senior euro zone official said on Tuesday.

Greece secured a second, 130 billion euro ($164 billion) bailout package in February from Europe and the International Monetary Fund, but an inconclusive general election in May and a return to the ballot box last Sunday delayed the implementation of the conditions attached to the bailout.

"Anybody who would say that we need not, and cannot renegotiate the MoU (memo of understanding) is delusional, because he, or she, would be under the understanding that the whole program, the whole process, has remained completely on track ever since the weeks before the Greek first election," the official said.

"Because the economic situation has changed, the situation of tax receipts has changed, the rhythm of implementation of the milestones has changed, the rhythm of privatization has changed, if we were not to change the MoU, it does not work," he said.

"We would be signing off on an illusion. So we have to sit down with our Greek colleagues and say: this is where we should be in July, and this is where we are in July, and there is a delta. Let's find out what the delta is and then how to deal with the delta - that is a new MoU," the official said.

There were 3.4 million job openings on the last business day of April, down from 3.7 million in March, the U.S. Bureau of Labor Statistics reported today. The hires rate (3.1 percent) and separations rate (3.1 percent) were essentially unchanged in April. This release includes estimates of the number and rate of job openings, hires, and separations for the nonfarm sector by industry and by geographic region.

The number of job openings in April was 3.4 million, a decline from March. Job openings decreased for total nonfarm, total private, and government as well as in manufacturing, professional and business services, and state and local government. The number of openings also decreased in April for the Midwest region. Although the number of total nonfarm job openings declined in April, the number of openings was 1.0 million higher than at the end of the recession in June 2009.

The number of job openings in April (not seasonally adjusted) increased over the year for total nonfarm and total private but was little changed for government. Job openings increased over the year for several industries and the Northeast and South regions.

Despite a bit of red on the screens at the moment, both MBS and Treasuries are not up to any new tricks so far this morning. Both are weaker at the moment, but nominally so within broader contexts. Treasuries managed to stay completely contained by yesterday's highs and low through the overnight session and into this morning but along with MBS are just slightly on the weaker side of that range at the moment. Zoom out to a viewpoint encompassing more than a day or two, however, and the "utterly sideways" picture becomes "utterly apparent."

The Housing Starts report fell on deaf ears, as expected, despite potentially significant upward movement in Permits (780k vs 728k consensus and 723k previous). The Bureau of Labor Statistics (same entity that puts out NFP), will be out with their usually overlooked JOLTS survey (Job Openings and Labor Turnover) at 10am, but it's more pertinent for broader, strategic point of view due to its relative lack of timeliness vs other reports. Still, it deserves a passing mention in that it can help flesh out the bigger picture from the June 1st NFP report, and we know that employment is a key topic for the Fed at the moment.

Speaking of the Fed, that's the story of the week so far: Wednesday's FOMC Announcement, Forecasts, and Bernanke Press Conference are clearly rendering all other market developments almost completely meaningless. We covered it in greater detail in The Day Ahead this morning, aptly named Counting The Hours Until Wednesday Afternoon". The bottom lines are that this week's Fed meeting is important in and of itself, seeing as how it's probably the first decent chance we have of policy shift in several meetings, and it also happens to fall on a week without much else going on, save for some election fallout in Europe. This amplifies the importance of the FOMC events as guidance givers, and such amplification tends to corral the price action that leads up to them.

So even though bond markets are slightly weaker this morning, the movements are indeed "coralled" with Treasuries and MBS remaining within recent ranges for now. That said, there has been a detectable uptick in volume and volatility in recent minutes, so we wouldn't let our guard down and assume utter "sideways-ness" just yet. Lines of demarcation in that respect look to be 105-02 in Fannie 3.5's (Hey! Just like yesterday!) and 1.60 in 10yr yields (also just like yesterday). We may be back in touch with you fairly quickly if these break down significantly.

As for now, they're merely undergoing some light testing. If these weak spots hold up supportively, that would be great, but to flesh out the frame of reference, 1.622 would be the MIDPOINT of the existing triangle in 10yr yields, with 1.63-ish on the high side. Even these levels "fit" within the broader sideways themes, and it's perfectly possible that we see such weakness today, and anything at those levels or lower ranks among the least eventful scenarios. Fannie 3.5 MBS would need to break below 104-30 to catch our attention (they're only two ticks away at the moment, so stay tuned).

BUILDING PERMITS
Privately-owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 780,000. This is 7.9 percent (±1.0%) above the revised April rate of 723,000 and is 25.0 percent (±1.5%) above the May 2011 estimate of 624,000. Single-family authorizations in May were at a rate of 494,000; this is 4.0 percent (±0.8%) above the revised April figure of 475,000. Authorizations of units in buildings with five units or more were at a rate of 266,000 in May.

HOUSING STARTS
Privately-owned housing starts in May were at a seasonally adjusted annual rate of 708,000. This is 4.8 percent (±12.7%)* below the revised April estimate of 744,000, but is 28.5 percent (±10.7%) above the May 2011 rate of 551,000. Single-family housing starts in May were at a rate of 516,000; this is 3.2 percent (±12.5%)* above the revised April figure of 500,000. The May rate for units in buildings with five units or more was 179,000.

HOUSING COMPLETIONS
Privately-owned housing completions in May were at a seasonally adjusted annual rate of 598,000. This is 10.3 percent (±13.2%)* below the revised April estimate of 667,000, but is 10.1 percent (±14.0%)* above the May 2011 rate of 543,000. Single-family housing completions in May were at a rate of 458,000; this is 6.3 percent (±13.2%)* below the revised April rate of 489,000. The May rate for units in buildings with five units or more was 130,000.