MBS Pricing Snapshot

The unfamiliar green glow of bond market gains has increasingly adorned the dashboard this morning though this remains a fairly recent and fairly shallow shift. After topping out at 2:20pm yesterday afternoon, 10yr yields pulled back, but never made it much below 1.82 before 5pm.

The overnight session was initially kind, seeing relatively strong support in Asia and Europe, but "relatively" is the key word. It wasn't a pronounced snap back to lower yields as much as it was a gradual easing--fueled by opportunistic buying and short covering--down merely to 1.80, give or take.

While Asia and Europe did no harm and caused no major waves, domestic accounts had their alarms set early to wake up and sell any overnight strength. While this was only a tactical, short-term move, it brought yields back up to 1.833 by the 8am Open. Once those tactical trading positions saw a decent amount of support pushing back at the highs, they began covering those short-term bets while those pushing back continued buying at a moderate pace as well.

The morning's only economic data--Housing Starts--was a non-issue in all this movement, garnering effectively no response in equities or bond markets. It was simply coincidentally reported in the midst of directional market movement, but isn't remotely the source of it.

MBS began the the session in similarly neutral territory vs yesterday's latest levels and have similarly improved in morning trading. Things were more tentative ahead of the cash open for stock markets but have added slightly to gains since then, bringing Fannie 3.0s up 5 ticks on the session to 104-13 and 10yr yields within striking distance of overnight lows at 1.800.

Snowballs roll in both directions... All we need now is a discouraging Cliff headline to firmly reinforce the bigger picture "range boundary zone" centered on the 1.85 levels hit yesterday in 10yr yields. More on epic technical battles in The Day Ahead, if you haven't seen it yet this AM.

- Housing Starts 861k vs 873k Consensus
- Building Permits 899k vs 875k Consensus
- Permits highest since July 2008

The U.S. Census Bureau and the Department of Housing and Urban Development jointly announced the following new residential construction statistics for November 2012:

BUILDING PERMITS
Privately-owned housing units authorized by building permits in November were at a seasonally adjusted annual rate of 899,000. This is 3.6 percent (±1.1%) above the revised October rate of 868,000 and is 26.8 percent (±1.7%) above the November 2011 estimate of 709,000. Single-family authorizations in November were at a rate of 565,000; this is 0.2 percent (±0.8%)* below the revised October figure of 566,000. Authorizations of units in buildings with five units or more were at a rate of 307,000 in November.

HOUSING STARTS
Privately-owned housing starts in November were at a seasonally adjusted annual rate of 861,000. This is 3.0 percent (±14.3%)* below the revised October estimate of 888,000, but is 21.6 percent (±12.5%) above the November 2011 rate of 708,000. Single-family housing starts in November were at a rate of 565,000; this is 4.1 percent (±13.3%)* below the revised October figure of 589,000. The November rate for units in buildings with five units or more was 285,000.

HOUSING COMPLETIONS
Privately-owned housing completions in November were at a seasonally adjusted annual rate of 677,000. This is 9.7 percent (±13.7%)* below the revised October estimate of 750,000, but is 16.1 percent (±9.5%) above the November 2011 rate of 583,000. Single-family housing completions in November were at a rate of 520,000; this is 2.4 percent (±11.7%)* below the revised October rate of 533,000. The November rate for units in buildings with five units or more was 150,000.