MBS Pricing Snapshot

The batch of morning economic data hasn't caused too much of a stir for bond market. There was some weakness following the stronger Case-Shiller data at 9am, but more than an equal amount of strength since then. Some of that was already in the works before the weaker-than-expected Consumer Confidence numbers.

Whatever the case, MBS and Treasuries have quietly and calmly moved to their best levels of the day. Fannie 3.5s are up 4 ticks at 101-09 and 10yr yields are down 3.4bps at 2.7068.

The Federal Housing Finance Agency (FHFA) today announced that the 2014 maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac will remain at $417,000 for one-unit properties in most areas of the country.

The Housing and Economic Recovery Act of 2008 (HERA) establishes the maximum conforming loan limit that Fannie Mae and Freddie Mac are permitted to set for mortgage acquisitions. HERA also requires annual adjustments to these limits to reflect changes in the national average home price.

A description of the methodology used in determining the loan limits can be found in the attached addendum. Questions concerning the conforming loan limits can be addressed to LoanLimitQuestions@FHFA.gov. Further information on potential future changes in the maximum size of loans that Fannie Mae and Freddie Mac guarantee will be forthcoming.

Link to maximum conforming loan limits for 2014.

- Nov Confidence 70.4 vs 72.9 forecast, 72.4 Oct
- "Jobs Hard to Get" 34.0 vs 34.9 previously (higher is better for rates)

- Reaction: moderately positive for bond markets, resulting in new lows for the day in 10yr yields and new highs in MBS.



The Conference Board Consumer Confidence Index®, which had decreased sharply in October, declined again in November. The Index now stands at 70.4 (1985=100), down from 72.4 in October. The Present Situation Index edged down to 72.0 from 72.6. The Expectations Index declined to 69.3 from 72.2 last month.

The monthly Consumer Confidence Survey®, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a leading global provider of information and analytics around what consumers buy and watch. The cutoff date for the preliminary results was November 15.

Said Lynn Franco, Director of Economic Indicators at The Conference Board: “Consumer confidence declined moderately in November after sharply declining in October. Sentiment regarding current conditions was mixed, with consumers saying the job market had strengthened, while economic conditions had slowed. However, these sentiments did not carry over into the short-term outlook. When looking ahead six months, consumers expressed greater concern about future job and earning prospects, but remain neutral about economic conditions. All in all, with such uncertainly prevailing, this could be a challenging holiday season for retailers.”

- Sept 20-city Home Prices +1.0 vs +0.8 forecast, +0.9 Aug
- 20-city Unadjusted +0.7 vs +0.7 forecast
- Year-over-year +13.3 pct vs +13.0 forecast
- Year-over-year increase is highest since Feb 2006
- Market Reaction: Treasuries slightly weaker while MBS mostly hold ground.

Data through September 2013, released today by S&P Dow Jones Indices for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, showed that the U.S. National Home Price Index rose 3.2% in the third quarter of 2013 and 11.2% over the last four quarters.

In September 2013, the 10- and 20-City Composites gained 0.7% month-over-month and 13.3% year-over-year. While 13 of 20 cities posted higher year-over-year growth rates, 19 cities had lower monthly returns in September than August.

- HPI +0.3 pct in Sept
- 12 month change: +8.5 pct


Upward momentum in U.S. house prices remained strong in the third quarter, as prices rose 2.0 percent from the previous quarter, according to the Federal Housing Finance Agency (FHFA) House Price Index (HPI). This is the ninth consecutive quarterly price increase in the purchase-only, seasonally adjusted index and it marks the first time since 2009 that the national house price level is higher than it was five years ago. “Overall, the housing market experienced another strong quarter, but price appreciation in the latter part of the quarter was relatively subdued,” said FHFA Principal Economist Andrew Leventis. “Price increases in August and September of 0.4 and 0.3 percent, respectively, were notably below appreciation rates observed earlier this year and in late 2012.”

Treasuries made a decent move lower overnight with Japan decidedly supportive right out of the gate. 10yr yields popped a quick 2bps lower right at Japan's open and faded back to yesterday's closing yields from there.

After finding good support without venturing into yesterday's range, European Central Bank governor Benoit Coeure gave bonds another lift with further talk of negative ECB deposit rates. This provided the biggest jolt for German Bunds, but 10yr Treasuries certainly took part. It was essentially the difference between overnight high yields and lows.

The domestic open saw Treasuries 2bps lower vs yesterday and Fannie 3.5 MBS 3 ticks higher at 101-08. We've traded just 2 ticks in either direction since then, currently at 101-06 ahead of Case Shiller Home Prices. More relevant data hits at 10am in the form of Consumer Confidence.

- Permits rose to 974k in Sept, 1.034 mln in Oct
- Previous reading was 926k, consensus was 930k
- No Housing Starts/Completions data until 12/18
- Market Reaction: if Treasuries/MBS care much about this permits number, they are not showing it. BUILDING PERMITS

Privately-owned housing units authorized by building permits in October were at a seasonally adjusted annual rate of 1,034,000. This is 6.2 percent (±0.8%) above the September rate of 974,000 and is 13.9 percent (±1.1%) above the October 2012 estimate of 908,000. Single-family authorizations in October were at a rate of 620,000; this is 0.8 percent (±0.9%)* above the September figure of 615,000. Authorizations of units in buildings with five units or more were at a rate of 387,000 in October.

HOUSING STARTS and HOUSING COMPLETIONS

The lapse in federal funding affected the data collection schedule for the Survey of Construction, the source of data on new housing units started and completed. Accurate data collection for September and October could not be completed in time for this release. Data on housing units started and completed in September, October, and November 2013 will be released on December 18, 2013.