MBS Pricing Snapshot

Bernanke Begins 2nd Day Of Congressional Testimony:

Qualified entities interested in purchasing pools of severely distressed loans formerly insured by the Federal Housing Administration (FHA) can now submit applications for the Distressed Asset Stabilization Program, an expansion of an FHA disposition program that sells pools of defaulted mortgages headed for foreclosure and provides the opportunity for the purchaser and borrower to avoid a costly foreclosure. According to loan pool information released today, approximately 3,500 loans will be sold in four metropolitan areas that are among those hardest hit by the foreclosure crisis – Chicago, IL; Newark, NJ; Phoenix, AZ; and Tampa, FL – aligning with other neighborhood stabilization efforts to help those communities recover as quickly as possible. The program is part of the Obama Administration's broader strategy to encourage public/private partnerships to stabilize neighborhoods and home values in critical markets. Details on the Distressed Asset Stabilization Program can be found at www.hud.gov/fhaloansales.

“The housing market has momentum not seen since before the crisis,” said HUD Secretary Shaun Donovan. “But some metro areas are still under pressure and some FHA borrowers remain seriously behind on their loans and stand to lose their homes in a matter of months. As one step towards avoiding unnecessary foreclosures and further stabilizing communities, we are increasing the number of loans beyond our original goals of 5,000 per quarter to approximately 9,000 this quarter. Providing the opportunity for borrowers to potentially stay in their home under a new sustainable mortgage or other meaningful help not only benefits that homeowner but reduces the costs to FHA and ultimately benefits the entire community.”

In "The Day Ahead" post, we noted that Bernanke's cards are probably on the table in terms of potential market movers, and that any major guidance is more likely to come from Europe. That has indeed been the case as German Bunds sunk to new all-time lows in the overnight session, dragging US Treasuries along for the ride (incidentally, German 10's are currently trading under 1.20).

Little else besides Europe has had much of an impact this morning, including the better-than-expected Housing Starts figures (admittedly though, those were offset by the less rosy building permits, not to mention the high margins of error that render the whole endeavor of reporting Housing Starts nigh on inconsequential).

10yr yields have traded fairly directionally lower from the Asian open, starting at 1.51 and moving down now to 1.47's. MBS opened higher and are a few ticks improved in the first hour of trade. Stock futures are lower as well and added very slightly to overnight losses on the Housing Starts numbers (maybe everyone's disillusioned by the margins of error!).

The only other major events for the day include scheduled Fed Twist buying from 10:15 - 11:00am and Round 2 of Bernank v Congress beginning at 10am with the same prepared remarks as yesterday (but hopefully more intelligent Q&A...)

Resistance target is around yesterday's highs for Fannie 3.0's at 103-22 and mid 1.46's in 10yr yields. These are perfectly attainable if we rally and the next target in 10's would be the 1.442 all-time lows. On the weak side of possibilities, 1.509 is really the only significant ceiling that we'd not want to break today, but 1.49 is another 'first line of defense' pivot.

The U.S. Census Bureau and the Department of Housing and Urban Development jointly announced the following new residential construction statistics for June 2012:

BUILDING PERMITS

Privately-owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 755,000. This is 3.7 percent (±1.0%) below the revised May rate of 784,000, but is 19.3 percent (±1.8%) above the June 2011 estimate of 633,000. Single-family authorizations in June were at a rate of 493,000; this is 0.6 percent (±0.8%)* above the revised May figure of 490,000. Authorizations of units in buildings with five units or more were at a rate of 241,000 in June.

HOUSING STARTS

Privately-owned housing starts in June were at a seasonally adjusted annual rate of 760,000. This is 6.9 percent (±13.3%)* above the revised May estimate of 711,000 and is 23.6 percent (±16.8%) above the June 2011 rate of 615,000. Single-family housing starts in June were at a rate of 539,000; this is 4.7 percent (±10.1%)* above the revised May figure of 515,000. The June rate for units in buildings with five units or more was 213,000.

HOUSING COMPLETIONS

Privately-owned housing completions in June were at a seasonally adjusted annual rate of 622,000. This is 2.6 percent (±12.5%)* above the revised May estimate of 606,000 and is 7.2 percent (±13.2%)* above the June 2011 rate of 580,000. Single-family housing completions in June were at a rate of 470,000; this is 1.3 percent (±9.8%)* above the revised May rate of 464,000. The June rate for units in buildings with five units or more was 134,000.