MBS Pricing Snapshot

10yr Treasuries quickly ran from 2.55 to 2.585 at the open and began grinding sideways from there (something they're still doing at the moment). Rather than follow Treasuries' flat footsteps, MBS experienced the second hour of trading in a slightly more positive light with Fannie 3.5s recovering 4-5 ticks briefly hitting unchanged levels. Fannie 4.0s are currently back to unchanged at 103-27 after hitting lows at 103-24 earlier.

Not much has happened since then. Progress into positive territory has been a challenge so far, but still looks possible. Pending Home Sales data was a relative non-event, with most of the move taking place before the data. The Fed's Treasury buyback is also going on at the moment, and its completion can cause volatility just after 11:02am.

- PHS Index 110.9 vs 111.2 consensus
- NAR Notes impact from higher mortgage rates

After reaching the highest level in over six years, pending home sales declined in June, with rising mortgage interest rates beginning to impact the market, according to the National Association of Realtors®.

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, edged down 0.4 percent to 110.9 in June from a downwardly revised 111.3 in May, but is 10.9 percent higher than June 2012 when it was 100.0; the data reflect contracts but not closings. Pending sales have been above year-ago levels for the past 26 months, and the pace in May was the highest since December 2006 when it reached 112.8.

Lawrence Yun, NAR chief economist, said higher home prices and interest rates are beginning to impact affordability, notably in high-cost regions. “Mortgage interest rates began to rise in May, taking some of the momentum out of contract activity in June,” he said. “The persistent lack of inventory also is contributing to lower contract signings.”

10yr Treasuries slid through the overnight session effectively unchanged, with yields especially contained during Asian hours and only marginally choppier (2.55-2.57 roughly) during European hours. As US markets have gotten down to business, sellers have pushed the pace as volume picks up.

10's are up to 2.583 and Fannie 4.0s are down 3 ticks at 103-24. Fannie 3.5s are down 5 ticks at 100-24. The weakness is only a factor for those with overnight price protection or who otherwise have the ability to lock before rate sheets print.

There is no significant news or economic events motivating this morning's movements--at least not in the sense that markets are reacting to anything that just happened. The only moderately significant report this morning hits at 10am with Pending Home Sales, making today is definitely the least hectic day this week.