MBS Live: MBS Morning Market Summary
Today was well-scripted in the sense that it offered little by way of actionable data compared to yesterday and tomorrow. Trading activity has been following that script quite well so far, with no major changes to yesterday afternoon's range. Treasuries and MBS alike have been perfectly contained, neither traveling to higher or lower levels than those seen since 1pm yesterday. Despite the containment, some of the movement between extremes has been abrupt, but not so much so to force any lender reprices. The Producer Price Index came in weaker than expected. While this did seem to give a slight boost to bond markets and stocks (because lower inflation is a counter-argument for tapering), neither side of the market made it back to overnight range boundaries before turning around.
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.
9:20AM :
Holding Modest Gains After Well-Contained, but Busy Overnight Session
Given yesterday's brisk movement in bond markets, the overnight session for Treasuries saw a surprisingly narrow range. 10yr yields dropped slightly at the start of the Asian market day and held flat neat 2.704 until European hours. Slightly stronger than expected GDP bumped yields up to 2.73 before a fairly convincing bounce back below 2.70.
Heading into the domestic session, buyers were unwilling to commit to anything much below 2.70 and sellers unwilling to take yields beyond overnight highs. The salient defensive bounce happened at 8:10am and sent bond markets back in friendlier directions well before the PPI data (weaker-than-expected).
At the very least, PPI didn't hurt bond markets' chances and it may have even helped slightly, but recall that PPI was heavily discounted over the past several years due to the "margin squeeze" phenomenon where producers were not able to pass on higher prices to consumers. It's relatively discounted now for the same reason working in reverse (i.e. even if producer prices fall, consumer prices aren't expected to fall as fast).
MBS began the session in line with yesterday's latest levels and are currently up 4 ticks in Fannie 4.0s at 103-15. 10yr yields are at a very 'conflicted' 2.712--right in the middle of their morning and overnight range.There is no other significant data today though there is a regularly scheduled Fed Treasury buying operation (POMO) from 10:15 - 11:00am and Fed's Bullard speaks in the afternoon.
Heading into the domestic session, buyers were unwilling to commit to anything much below 2.70 and sellers unwilling to take yields beyond overnight highs. The salient defensive bounce happened at 8:10am and sent bond markets back in friendlier directions well before the PPI data (weaker-than-expected).
At the very least, PPI didn't hurt bond markets' chances and it may have even helped slightly, but recall that PPI was heavily discounted over the past several years due to the "margin squeeze" phenomenon where producers were not able to pass on higher prices to consumers. It's relatively discounted now for the same reason working in reverse (i.e. even if producer prices fall, consumer prices aren't expected to fall as fast).
MBS began the session in line with yesterday's latest levels and are currently up 4 ticks in Fannie 4.0s at 103-15. 10yr yields are at a very 'conflicted' 2.712--right in the middle of their morning and overnight range.There is no other significant data today though there is a regularly scheduled Fed Treasury buying operation (POMO) from 10:15 - 11:00am and Fed's Bullard speaks in the afternoon.
8:43AM :
ECON: Core Inflation at Producer Level Lowest Since Nov 2010
- July PPI 0.0 vs +0.3 forecast, +0.8 previous
- Core PPI +0.1 vs +0.2 forecast, +0.2 previous
- Annual PPI +2.1 vs +2.4 forecast
- Annual Core PPI +1.2 vs +1.4 forecast
- Annual PPI lowest since Nov 2010
- Market Reaction: Minimal, but moderately positive for bond markets, maybe. 10's had already rejected a break of 2.724 and were improving since 8:10am. They were at 2.715 before PPI and are now at 2.710.
The Producer Price Index for finished goods was unchanged in July, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Prices for finished goods moved up 0.8 percent in June and 0.5 percent in May. At the earlier stages of processing, prices received by manufacturers of intermediate goods also were unchanged in July, and the crude goods index rose 1.2 percent. On an unadjusted basis, prices for finished goods advanced 2.1 percent for the 12 months ended July 2013.
- Core PPI +0.1 vs +0.2 forecast, +0.2 previous
- Annual PPI +2.1 vs +2.4 forecast
- Annual Core PPI +1.2 vs +1.4 forecast
- Annual PPI lowest since Nov 2010
- Market Reaction: Minimal, but moderately positive for bond markets, maybe. 10's had already rejected a break of 2.724 and were improving since 8:10am. They were at 2.715 before PPI and are now at 2.710.
The Producer Price Index for finished goods was unchanged in July, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Prices for finished goods moved up 0.8 percent in June and 0.5 percent in May. At the earlier stages of processing, prices received by manufacturers of intermediate goods also were unchanged in July, and the crude goods index rose 1.2 percent. On an unadjusted basis, prices for finished goods advanced 2.1 percent for the 12 months ended July 2013.
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.
Victor Burek : "I still haven't seen food prices drop, even though commodity prices lower"
Matthew Graham : "Until Victor laments local grocery prices being too low, I can't be too worried about deflation"
John Tassios : "FED is stuck in a quandry, they want to get out of QE ASAP, but are very nervous if they taper, it may actually push inflation to go even lower , UE coming down a bit, but wages are falling, which will lead to lower inflation too"
Matthew Graham : "RTRS- U.S. JULY YEAR-OVER-YEAR PPI +2.1 PCT (CONS +2.4 PCT), CORE +1.2 PCT, LOWEST SINCE NOV 2010, (CONS +1.4 PCT) "
Matthew Graham : "RTRS- U.S. JULY PPI EXFOOD/ENERGY +0.1 PCT (CONS +0.2 PCT) VS JUNE +0.2 PCT "
Matthew Graham : "RTRS- U.S. JULY PPI UNCH (CONSENSUS +0.3 PCT), VS JUNE +0.8 PCT "
Matt Hodges : "blazing recovery in UE rate"
Matthew Graham : "RTRS - REUTERS POLL-U.S. JOBLESS RATE TO AVERAGE 7.0 PCT BY Q2 2014, 6.9 PCT Q3, 6.8 PCT Q4 2014 "
Matthew Graham : "RTRS - REUTERS POLL-U.S. GDP FORECASTS BROADLY STEADY VS LAST MONTH: SEEN ANNUALIZED +2.2 PCT IN Q3, +2.6 PCT Q4 "
Matthew Graham : "RTRS- REUTERS POLL-MAJORITY OF ECONOMISTS STILL EXPECTS U.S. FED TO START TAPERING BOND PURCHASES IN SEPTEMBER "
Jeff Anderson : "I saw my Co. had a slow week last week. Curious to see if this week picks up or have to wait till school starts after Labor Day."
John Tassios : "Looks like MBA data fell again accross the board, so much for FED's assumption that higher rates will not hurt housing"
John Tassios : "buyers like these levels of 2.70 - 2.75 10 Yr TSY "
Victor Burek : "or maybe traders don't really believe the data...remember, When it becomes serious, you have to lie." -Jean Claude Juncker"
Jeff Anderson : "GM, all. I saw the EU GDP. Thought we'd take a body blow for that, but not too bad....yet. Maybe the can kicking is working?"
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