MBS Live: MBS Morning Market Summary
Bond markets opened in weaker territory this morning after ECB Pres Mario Draghi was quoted as saying that ECB bond buying up to 3yr maturities does not constitute "state aid," and therefore doesn't violate the Euro Zone treaty, according to a leaked recording (apparently not intended for public consumption). The "top secret" nature of the recording lost a good bit of its luster when he said the same thing again today. Add to that the fact that there's really only one ECB governor that remains in stern opposition to the shorter duration buying and the prospects for some sort of ECB action on Thursday are good. That said, such prospects were already mostly priced in to the market and the running consensus already saw likely bond buys in shorter maturities with the 3yr conversation simply being a slightly longer version of the "up to 2yr" durations that were expected. It was still enough to put some pressure on German Bunds overnight, and Treasuries followed to some extent. But domestic bond markets fought back without losing too much ground, and MBS actually made it back into the green, helped along by weaker economic data this morning (which continues to offer no objections to the additional easing the FOMC said would be likely if the economy didn't show sustainable and substantial improvement).
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.
11:01AM :
ECB's Weidmann isolated on opposing bond buying - paper
(Reuters) - German Central Bank President Jens Weidmann is completely isolated in the European Central Bank in his opposition to buying government bonds, a Dutch newspaper reported on Tuesday, citing unnamed sources.
Both publicly and behind closed doors, Weidmann has no support for his opposition to ECB President Mario Draghi's plan to help Spain and Italy with new interventions, Dutch daily Het Financieele Dagblad said.
Both publicly and behind closed doors, Weidmann has no support for his opposition to ECB President Mario Draghi's plan to help Spain and Italy with new interventions, Dutch daily Het Financieele Dagblad said.
10:59AM :
Spain's Rajoy to seek German backing for a bailout
(Reuters) - Prime Minister Mariano Rajoy's eight months in power have been tumultuous from the start but September and October may be even tougher, with the Spanish leader assailed on all sides.
Internationally he is caught between diverging pressures from Germany and France, and at home he faces protests over spending cuts sought by the euro zone's big powers.
France wants Rajoy to request an international bailout to prop up Spanish finances and stop the debt crisis deepening.
But he is unwilling to ask for aid until he is sure of support from euro zone paymaster Germany which he will seek on Thursday at a meeting with Chancellor Angela Merkel.
"The worst thing that could happen is Spain asks for aid and Germany blocks it," said a senior European diplomat.
Internationally he is caught between diverging pressures from Germany and France, and at home he faces protests over spending cuts sought by the euro zone's big powers.
France wants Rajoy to request an international bailout to prop up Spanish finances and stop the debt crisis deepening.
But he is unwilling to ask for aid until he is sure of support from euro zone paymaster Germany which he will seek on Thursday at a meeting with Chancellor Angela Merkel.
"The worst thing that could happen is Spain asks for aid and Germany blocks it," said a senior European diplomat.
10:10AM :
ECON: Construction Spending Sees Biggest Decline In One Year
- Spending -0.9 vs +0.4 consensus, +0.4 previous
- Private spending -1.2, public -0.4
- Total spending lowest since April 2012, biggest drop in 1 year
The U.S. Census Bureau of the Department of Commerce announced today that construction spending during July 2012 was estimated at a seasonally adjusted annual rate of $834.4 billion, 0.9 percent (±1.8%)* below the revised June estimate of $842.2 billion. The July figure is 9.3 percent (±2.3%) above the July 2011 estimate of $763.5 billion.
During the first 7 months of this year, construction spending amounted to $464.4 billion, 9.3 percent (±1.5%) above the $425.0 billion for the same period in 2011.
Spending on private construction was at a seasonally adjusted annual rate of $558.7 billion, 1.2 percent (±1.3%)* below the revised June estimate of $565.6 billion. Residential construction was at a seasonally adjusted annual rate of $264.6 billion in July, 1.6 percent (±1.3%) below the revised June estimate of $268.9 billion. Nonresidential construction was at a seasonally adjusted annual rate of $294.1 billion in July, 0.9 percent (±1.3%)* below the revised June estimate of $296.7 billion.
In July, the estimated seasonally adjusted annual rate of public construction spending was $275.7 billion, 0.4 percent (±2.8%)* below the revised June estimate of $276.7 billion. Educational construction was at a seasonally adjusted annual rate of $66.0 billion, 0.6 percent (±4.4%)* below the revised June estimate of $66.4 billion. Highway construction was at a seasonally adjusted annual rate of $81.2 billion, 0.3 percent (±7.2%)* below the revised June estimate of $81.4 billion.
- Private spending -1.2, public -0.4
- Total spending lowest since April 2012, biggest drop in 1 year
The U.S. Census Bureau of the Department of Commerce announced today that construction spending during July 2012 was estimated at a seasonally adjusted annual rate of $834.4 billion, 0.9 percent (±1.8%)* below the revised June estimate of $842.2 billion. The July figure is 9.3 percent (±2.3%) above the July 2011 estimate of $763.5 billion.
During the first 7 months of this year, construction spending amounted to $464.4 billion, 9.3 percent (±1.5%) above the $425.0 billion for the same period in 2011.
Spending on private construction was at a seasonally adjusted annual rate of $558.7 billion, 1.2 percent (±1.3%)* below the revised June estimate of $565.6 billion. Residential construction was at a seasonally adjusted annual rate of $264.6 billion in July, 1.6 percent (±1.3%) below the revised June estimate of $268.9 billion. Nonresidential construction was at a seasonally adjusted annual rate of $294.1 billion in July, 0.9 percent (±1.3%)* below the revised June estimate of $296.7 billion.
In July, the estimated seasonally adjusted annual rate of public construction spending was $275.7 billion, 0.4 percent (±2.8%)* below the revised June estimate of $276.7 billion. Educational construction was at a seasonally adjusted annual rate of $66.0 billion, 0.6 percent (±4.4%)* below the revised June estimate of $66.4 billion. Highway construction was at a seasonally adjusted annual rate of $81.2 billion, 0.3 percent (±7.2%)* below the revised June estimate of $81.4 billion.
10:06AM :
ECON: Downbeat ISM Manufacturing Report Misses Estimates
PMI at 49.6 vs 5.0 Consensus
Economic activity in the manufacturing sector contracted in August for the third time since July 2009; however, the overall economy grew for the 39th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.
The PMI™ registered 49.6 percent, a decrease of 0.2 percentage point from July's reading of 49.8 percent, indicating contraction in the manufacturing sector for the third consecutive month. This is also the lowest reading for the PMI™ since July 2009.
The New Orders Index registered 47.1 percent, a decrease of 0.9 percentage point from July, indicating contraction in new orders for the third consecutive month.
The Production Index registered 47.2 percent, a decrease of 4.1 percentage points and indicating contraction in production for the first time since May 2009. The
Employment Index remained in growth territory at 51.6 percent, but registered its lowest reading since November 2009 when the Employment Index registered 51 percent.
The Prices Index increased 14.5 percentage points from its July reading to 54 percent. Comments from the panel generally reflect a slowdown in orders and demand, with continuing concern over the uncertain state of global economies.
Economic activity in the manufacturing sector contracted in August for the third time since July 2009; however, the overall economy grew for the 39th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.
The PMI™ registered 49.6 percent, a decrease of 0.2 percentage point from July's reading of 49.8 percent, indicating contraction in the manufacturing sector for the third consecutive month. This is also the lowest reading for the PMI™ since July 2009.
The New Orders Index registered 47.1 percent, a decrease of 0.9 percentage point from July, indicating contraction in new orders for the third consecutive month.
The Production Index registered 47.2 percent, a decrease of 4.1 percentage points and indicating contraction in production for the first time since May 2009. The
Employment Index remained in growth territory at 51.6 percent, but registered its lowest reading since November 2009 when the Employment Index registered 51 percent.
The Prices Index increased 14.5 percentage points from its July reading to 54 percent. Comments from the panel generally reflect a slowdown in orders and demand, with continuing concern over the uncertain state of global economies.
9:40AM :
ECON: U.S. factory activity still slow in August: Markit
Markit PMI Release
(Reuters) - The pace of growth in manufacturing remained sluggish in August as exports declined for a third straight month and firms were slow to add new workers, a survey showed on Tuesday.
The final Markit U.S. Manufacturing Purchasing Managers Index stood at 51.5 this month, below a preliminary estimate of 51.9. A reading above 50 indicates expansion.
A slight increase in output and overall new orders helped nudge the index above 51.4, where it stood at the end of July.
But the pace of growth was still one of the weakest since the sector stopped shrinking in October of 2009. New export orders were a drag on activity, as slow or negative growth in Europe and elsewhere sapped foreign demand for U.S. products.
(Reuters) - The pace of growth in manufacturing remained sluggish in August as exports declined for a third straight month and firms were slow to add new workers, a survey showed on Tuesday.
The final Markit U.S. Manufacturing Purchasing Managers Index stood at 51.5 this month, below a preliminary estimate of 51.9. A reading above 50 indicates expansion.
A slight increase in output and overall new orders helped nudge the index above 51.4, where it stood at the end of July.
But the pace of growth was still one of the weakest since the sector stopped shrinking in October of 2009. New export orders were a drag on activity, as slow or negative growth in Europe and elsewhere sapped foreign demand for U.S. products.
9:07AM :
ALERT ISSUED:
Bond Markets Slightly Weaker After Draghi Comments. Holding Ground.
As market participants get back to business after the official end to vacation season, volume has picked up noticeably. The key event overnight (or yesterday to be more precise) was Draghi's leaked comments regarding ECB bond buying of up to 3yr maturities NOT constituting state aid. To many, this confirmed that we're likely to see at least something come out of Thursday's ECB Announcement with respect to new ECB action, even if it's relatively underwhelming.
Whatever the case, the news moved German Bunds noticeably yesterday and they haven't really even attempted to recover levels from before the news. US Treasuries have followed closely, but in a lower magnitude version of EU bond market movements. This leaves 10yr yields up just under 3bps from Friday and sees Fannie 3.0's holding a somewhat supportive line at 103-20 to 103-22 after opening just a few ticks off Friday's 103-27 high at 103-24 earlier this morning.
On today's data calendar, Markit PMI just printed very close to expectations and bond markets didn't much react. The more important release this morning is the ISM Manufacturing data ahead at 10am. Forecast calls for a 50.0 reading on the purchasing manager's index, but the Employment component will be closely watched as well. Construction Spending shares the 10am time slot, but is second fiddle to the ISM data.
Whatever the case, the news moved German Bunds noticeably yesterday and they haven't really even attempted to recover levels from before the news. US Treasuries have followed closely, but in a lower magnitude version of EU bond market movements. This leaves 10yr yields up just under 3bps from Friday and sees Fannie 3.0's holding a somewhat supportive line at 103-20 to 103-22 after opening just a few ticks off Friday's 103-27 high at 103-24 earlier this morning.
On today's data calendar, Markit PMI just printed very close to expectations and bond markets didn't much react. The more important release this morning is the ISM Manufacturing data ahead at 10am. Forecast calls for a 50.0 reading on the purchasing manager's index, but the Employment component will be closely watched as well. Construction Spending shares the 10am time slot, but is second fiddle to the ISM data.
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.
Matthew Graham : "RTRS- US JULY TOTAL CONSTRUCTION SPENDING LOWEST SINCE APRIL 2012, BIGGEST DROP IN ONE YEAR "
Matthew Graham : "RTRS- US JULY PRIVATE CONSTRUCTION SPENDING -1.2 PCT, PUBLIC SPENDING -0.4 PCT "
Matthew Graham : "RTRS - US JULY CONSTRUCTION SPENDING -0.9 PCT (CONSENSUS +0.4 PCT) TO $834.4 BLN VS JUNE +0.4 PCT "
Matthew Graham : "RTRS - ISM U.S. MANUFACTURING EMPLOYMENT INDEX AT LOWEST SINCE NOVEMBER 2009 "
Matthew Graham : "RTRS- ISM U.S. MANUFACTURING NEW ORDERS INDEX AT LOWEST SINCE APRIL 2009 "
Matthew Graham : "RTRS - ISM U.S. MANUFACTURING PMI INDEX AT LOWEST SINCE JULY 2009 "
Matthew Graham : "RTRS- ISM U.S. MANUFACTURING EMPLOYMENT INDEX 51.6 IN AUGUST VS 52.0 IN JULY "
Matthew Graham : "RTRS - ISM REPORT ON U.S. MANUFACTURING SHOWS PMI AT 49.6 IN AUGUST (CONSENSUS 50.0) VS 49.8 IN JULY "
Matthew Graham : "Thomas, the 4.0 doesn't really have much, if any bearing on rate sheets considering that bucket contains mostly 4.25%-4.625% rates--not many of those being produced at the moment relative to the 3.25%-3.625% range that comprises the 3.0 coupon. 30yr in the price table refers to the 30yr Treasury Bond, thus has nothing to do with mortgage rates and MBS apart from being a broad guidance giver for the shape of the Treasury yield curve--sort of a backdrop for the general, longer term trends in the "
Thomas L : "looking at the dashboard for 4.0 and 30yr. is this a bad sign for interest rates or too early to tell?"
Matthew Graham : "RTRS - MARKIT U.S. MANUFACTURING SECTOR FINAL PMI EMPLOYMENT INDEX FOR AUGUST AT 52.4 VS FLASH READING 52.5 AND FINAL 52.7 IN JULY "
Matthew Graham : "RTRS- MARKIT U.S. MANUFACTURING SECTOR FINAL PMI OUTPUT INDEX FOR AUGUST AT 51.9 VS FLASH READING 52.4 AND FINAL 51.7 IN JULY "
Matthew Graham : "RTRS - MARKIT U.S. MANUFACTURING SECTOR FINAL PMI FOR AUGUST AT 51.5 VS FLASH READING 51.9 AND FINAL 51.4 IN JULY "
Gus Floropoulos : "There are 3.8 liters to a gallon, that means a gallo of gas is around $7.50"
Victor Burek : "thats better than Spain with unemployment around 50% for people in that age group"
Gus Floropoulos : "Salaries in Greece have been cut in half, unemployment is hovering aroun 40% for people btw 18-35, and the price of goods has skyrocketed, not to mention gas is @ 2€ per liter not gallon"
Jeff Anderson : "GM, all. Are you ready for some football? And not, futbol. Should be another interesting week, DNC, ECB. How funny is it that the big banks are coming to the rescue of the DNC and hlping fill the budget gap for their rally. Priceless."
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