MBS Pricing Snapshot

- Annual rate of 4.75 mln vs 4.75 mln consensus
- represents a decline of 1.7 pct from August 4.83 mln
- Inventory 2.32 mln vs 2.4 mln in August
- 24 pct distressed vs 22 pct in August

From the NAR:
September existing-home sales declined modestly, but inventory continued to tighten and the national median home price recorded its seventh back-to-back monthly increase from a year earlier, according to the National Association of Realtors.

Total existing-home sales1, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 1.7 percent to a seasonally adjusted annual rate of 4.75 million in September from an upwardly revised 4.83 million in August, but are 11.0 percent above the 4.28 million-unit pace in September 2011.

Lawrence Yun , NAR chief economist, said the market trend is up. "Despite occasional month-to-month setbacks, we're experiencing a genuine recovery," he said. "More people are attempting to buy homes than are able to qualify for mortgages, and recent price increases are not deterring buyer interest. Rather, inventory shortages are limiting sales, notably in parts of the West."

After days of steady weakness, yesterday morning's opening strength and stability gave the false hope that bond markets could be bouncing. Today again, we're greeted with Treasury and MBS prices that are moderately improved and have held fairly narrow, stable ranges in the first hour of trading.

The overnight session was remarkably quiet given the general ramping up of activity into the end of the week. The announcement that the EU Summit decided that a single supervisor will oversee Euro zone banks seems to have been read as a foregone conclusion, or at least one that was close enough to being cemented over the past two days that it's finalization didn't cause much of a stir overnight.

The more interesting thing is that nothing else caused much of a stir overnight either. Technicals seem to be taking over with a big nasty triangle (lower highs and higher lows) forming in 10yr yields IF (and that's a fairly big "if") bond markets can indeed manage to keep it together today.

10's and stock futures were fairly hooked up overnight with 10's trading a range from 1.834 to 1.798. The first hour of the domestic session has been exclusively weaker for Treasuries albeit in better territory than yesterday afternoon. Disconcertingly, 10's are less than a bp from yesterday's close, giving the impression that this morning's "better territory" could be a fleeting thing.

MBS, for their part, are doing OK. In the bigger picture from the lows of mid August and highs of late September, MBS are still closer to the highs (while Treasuries are closer to the weak end of their range, thanks QE3). Fannie 3.0's opened slightly stronger and have cut a fairly narrow range from 104-10 to 104-14 so far this morning, but look to be testing the lower end of that range at the moment.

There's been nothing by way of data or events to give guidance so far and the only piece of economic data will be Existing Home Sales at 10am.