MBSonMND: MBS MID-DAY
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Morning Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBSonMND Dashboard
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10:52AM :
MBS Soar On Bond Market Rally. Lenders Out With Strong Pricing
If your lender hasn't priced yet today, they soon will, and likely with much more love than yesterday. The last of the major econ data for the week is in and after some back and forth bouncing, 10yr treasuries have confirmed a breakout of a roughly 2 week range, with yet another strong bounce off support following 10am data. See the first chart in the link below for a look at that range and the 2 noticeable bounces since the breakout. The rest of the day will just be about watching that lower red line for continued support. For now, FNCL 4.5's have been stable with around 11 ticks in gains from yesterday, resulting in very aggressive lender rate sheets this AM>.
10:24AM :
New MBS Commentary Post
10:07AM :
ALERT:
10 Yr Yields Rise Following 10am Data. MBS Off Highs
10's are currently testing an important pivot point at 3.582 as they struggle to show support versus yesterday's low yield levels. FNCL 4.5's are off their highs a few ticks, now down to 101-03. The breakout of this mornings narrow, positive range is still very much undecided, but for now, bonds are playing defense against a worsening trend (and so far winning). Expect a resolution of the trend shortly. If 10's can get back under 3.58, it will bode well for the rest of the day.
10:03AM :
U.S. JAN LEADING ECONOMIC INDICATORS +0.1 PCT (CONSENSUS +0.2 PCT) VS DEC +0.8 PCT (PREV +1.0 PCT)
(Source: Reuters)
10:02AM :
US mortgage delinquences fall in fourth quarter-MBA - RTRS
*** US 2010 Q4 SEASONALLY ADJUSTED MORTGAGE DELINQUENCY RATE 8.22 PCT VS 9.13 PCT IN Q3, 9.47 PCT Q4 2009 -- MBA
*** SHARE OF U.S. MORTGAGES IN FORECLOSURE AT 4.63 PCT IN Q4 VS 4.39 PCT IN Q3, 4.58 PCT IN Q4 2009 - MBA
*** US HOME LOANS ENTERING FORECLOSURE PROCESS IN Q4 1.27 PCT VS 1.34 PCT IN Q3, 1.20 PCT IN Q4 2009 - MBA
10:01AM :
PHILADELPHIA FED SIX-MONTH CAPITAL EXPENDITURES OUTLOOK FEB 16.2 VS JAN 29.0
*** BUSINESS CONDITIONS FEBRUARY 35.9 VS JAN 19.3
*** BUSINESS CONDITIONS FEB 35.9 VS JAN 19.3
*** NEW ORDERS INDEX FEB 23.7 VS JAN 23.6
*** PRICES PAID INDEX FEB 67.2 VS JAN 54.3
*** EMPLOYMENT INDEX FEB 23.6 VS JAN 17.6
*** SIX-MONTH BUSINESS CONDITIONS FEB 46.8 VS JAN 49.8
*** SIX-MONTH CAPITAL EXPENDITURES OUTLOOK FEB 16.2 VS JAN 29.0
9:33AM :
Bullish Breakout Failed, BUT MBS Remain High Enough For Improved Pricing
Why all the talk about 10yr notes when MBS are the drivers of mortgage rates? Especially in times where broad trends may be shifting, we need something "vanilla" to act as a "benchmark" for the broader bond market sentiment. But because MBS trade at a spread to risk-free bond benchmarks, they are an additional degree of separation away from representing the central tendencies of the overall bond market, so 10's are the best bet. 10's are merely a yard-stick. And the yard stick failed on it's first attempt to break out the lower end of it's recent range. It's not all bad though... If that happened, we were looking for support (a ceiling for rising yields) based on yesterday's low yields. We got it! Right about 3.584. Now we watch and wait to see whether that level breaks or whether the previous low of 3.561 breaks. This all has more to do with how the rest of the day might go, but as far as this morning is concerned, FNCL 4.5's are at two week highs of 101-03, meaning you should be seeing much improved pricing if you get sheets while MBS remain above 101-00.
8:58AM :
ALERT:
Bonds Now Testing Bullish Breakout In High Volume! (That's A Good Thing)
Long story short, 10yr yields have been contained by a "trend channel" in the past two weeks (that's when parallel lines contain the yield movements with yields touching or coming close to touching either line with reasonable frequency). In order to signal a shift in that trend, yields would need to break out of the channel. The lower yield line would need to see us break something around 3.567 (that's what we call the "bullish resistance line"). When yields touch that line or even prod slightly lower levels without definitively breaking through, that constitutes a "test." So "testing the bullish breakout" means we have 10yr yields currently hovering around that 3.567 level and that if they move lower (aka "breakout"), it's a good thing. High volume is needed to add validity to such breakouts and indeed, it is high enough that if we do see yields break lower, we can ascribe significance to the event.
8:55AM :
New MBS Commentary Post
8:39AM :
Bond Markets Rally In Initial Response To Morning Data
Jobless Claims were slightly higher than expected, but very near consensus. And while both headline and core CPI were slightly higher than expected, the margin between consensus and actual is small enough and other factors in the report favorable enough that bonds initial move following the data is to RALLY to their best levels of the morning. 10yr yields are at 3.587 and FNCL 4.5's are at 100-31. Neither of these are the best levels of the week, but both are close.
8:34AM :
Jobless Claims Rise To 410k Vs 400k Consensus
*** JOBLESS CLAIMS ROSE TO 410,000 FEB 12 WEEK (CONSENSUS 400,000) FROM 385,000 PRIOR WEEK (PREVIOUS 383,000)
*** JOBLESS CLAIMS 4-WK AVG ROSE TO 417,750 FEB 12 WEEK FROM 416,000 PRIOR WEEK (PREV 415,500)
*** CONTINUED CLAIMS ROSE TO 3.911 MLN (CON. 3.900 MLN) FEB 5 WEEK FROM 3.910 MLN PRIOR WEEK (PREV 3.888 MLN)
*** INSURED UNEMPLOYMENT RATE UNCH AT 3.1 PCT FEB 5 WEEK FROM 3.1 PCT PRIOR WEEK (PREV 3.1 PCT)
8:32AM :
Jan CPI rose 0.4 pct - RTRS
*** CPI +0.4 PCT (+0.3978; CONSENSUS +0.3 PCT), EXFOOD/ENERGY +0.2 PCT (+0.1697; CONS +0.1 PCT)
*** CPI YEAR-OVER-YEAR +1.6 PCT (CONS +1.6 PCT), EXFOOD/ENERGY +1.0 PCT (CONS +0.9 PCT)
*** UNADJUSTED CPI INDEX 220.223 (CONS 220.15) VS DEC 219.179
*** CPI ENERGY +2.1 PCT, GASOLINE +3.5 PCT, NEW VEHICLES -0.1 PCT
*** CPI FOOD +0.5 PCT, HOUSING +0.1 PCT, OWNERS' EQUIVALENT RENT OF PRIMARY RESIDENCE +0.1 PCT
*** CORE CPI SEASONALLY ADJUSTED INDEX 222.587 VS DEC 222.210
*** REAL EARNINGS ALL PRIVATE WORKERS -0.3 PCT (CONS -0.3 PCT) VS DEC -0.1 PCT (PREV -0.4 PCT)
Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBSonMND Dashboard
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Brett Boyke : "may be the reason the market did not react to the headlin on the Philly - The Philly Fed Current Business Outlook Survey came out at a print of 35.9 compared to 19.3 before, and expectations of 21.0. This print is the highest reading since January 2004. Yet the only component metric that matters is, you guessed it, the Prices Paid index, which came at a ridiculous 67.2 from 54.3 previously! The prices paid index, which increased 13 points in February, has now increased 55 points over the past fi"
Matthew Graham : "I think what we see today is a breakout of the mid-term diagonal trend channel, which we've already seen and that the rest of the day is about confirming that and supporting it. Doesn't really matter how much more we rally as long as we hold that pivot based support from the previous low end of the trend channel."
Victor Burek : "flagstar .25 better than yesterday"
Matthew Graham : "that was just the last of a series of important data this morning. Markets had to wait for Philly Fed report to have it's say, but so far they are telling us it wasn't good enough to offset the read on the CPI report"
Matthew Graham : "It's not necessarily all about the Philly Fed Jeff"
Jeff Anderson : "Why was the Phiily Fed # dismissed?"
Matthew Graham : "putting up a valiant fight! Come on baby! you can do it!"
Mike Drews : "nice to see the range actually helping is when data doesn't go our way."
Victor Burek : "fhilly fed much higher, almost double"
Bernie : "where else can you go to work and be in chat all day!"
Matt Hodges : "WF .25 better than last reprice"
John Rodgers : "The play by play here is fun to watch."
Bernie : "GMAC must have updated thier servicing values or something., they have been hotter than normal, "
Matthew Graham : "I think we'll get a decent pop of volume at 10am and either break or bounce here (that's the logical assumption anyway) "
Brett Boyke : "GMAC is really agressive right now, must want to keep the troops busy"
Matthew Graham : "seems like some nice gains!"
Bernie : "GMAC is on fire....about 15-176 bps hotter than BOA"
Brett Boyke : "Chase .361 better out of the gate"
Bernie : "BOA better on average 33 bps and 26.4 bps conf 30 and gov 30's....not too bad"
Matthew Graham : "Rodgers 2's are doing more than keep up with 10's so far, almost 2bps steeper curve so far today"
John Rodgers : "Matt, would you surmise that 2's are keeping up with 10's or not? "
Kent Taylor : "nice feature, good green this am!"
Kent Taylor : "good morning from my phone"
Matthew Graham : "First level of big picture happiness would be crossing over the previous long term closing high"
Jason York : "i guess I am asking if it would have more significance"
Jason York : "ok, but would it mean more to stick at that then 3.6?"
Matthew Graham : "easy to see what I'm talking about when I say "pivot bounce" if you pull up just the 2 day chart in 10's (just click the 10yr in the left hand price display), and starting from the low yields yesterday, draw a flat line to the right. Notice anything bouncing against that line from the other direction? If you didn't already understand it perfectly, now you do: PIVOT POINT."
Matthew Graham : "Oh nice! we may be getting a pivot bounce exactly where we wanted one"
Matthew Graham : "For example, breaking lower in this trend isn't as significant as breaking 3.57 on a daily chart"
Matthew Graham : "In respond to Andy's question on whether or not a 5 day trend is a trend. Absolutely it is. 5 minutes can be a trend. It just means that it was a 5 minute trend and that any breakout should only be considered with a nominal amount of significance given the length of the trend being broken"
Matthew Graham : "that's good feedback Ken. we're going to start a weekly training webinar for the site so everyone knows where everything is"
Matthew Graham : "and presto! you have your very own trend channel to watch"
Matthew Graham : "and finally, draw a pair of railroad tracks with your minds eye around the yield movement"
Ken Crute : "yeah, at little easier than I thought, did not see the tab before "
Matthew Graham : "then change the security to the 10 yr"
Matthew Graham : "click "additional charts" and drop down to "5 day""
Andy Pada : "I do, but does 5 day = a trend?"
Ken Crute : "5 day? just in case someone, someone other than me of course, is not sure how to do the 5 day, maybe you could remind us, err them "
Matthew Graham : "Anyone NOT familiar with how to zoom out to a 5 day view? don't be shy now..."
Matthew Graham : "zoom out to a 5 day view to note the trend channel"
Victor Burek : "europe has turned much lower following our data"
Matthew Graham : "watching the potential bounce confirmation"
Matthew Graham : "10 yr chart is more interesting than MBS at the moment"
Matthew Graham : "Always gonna sting when we examine the decisions we should have made differently with hindsight, but the goal is not to "never make them," but rather to have them comprise 40% of our decisions versus an uninformed 50/50"
JTB : "Daniel--It's like a good fold in Poker. Sometimes making the right decision in a single hand, could turn out to have been wrong. You make the right decisions over the course of a year, you can consider going pro."
Matthew Graham : "10's are very close to testing that hourly trend channel"
Matthew Graham : "If we break out, we readjust and go from there and any $$ perceived to be lost from locking too early last night is a gladly paid price of admission to write new business at lower rates"
Matthew Graham : "hindsight's 20/20 but we were at the best levels and with the best rate sheets we'd seen in 2 weeks, and at a market-based "sell signal" for bonds"
Matthew Graham : "Here's one other number to make note of today: 3.567. That's the yield 10 years could get down to and STILL be in line with the recent trend channel. In other words, that's an even more important signal of momentum shift than merely breaking yesterday's horizontal lows, but even that has proved elusive thus far, at least in the early minutes of the data reaction period."
JTB : "I think this was a bond friendly bit of news. If we're going to bust lower on the 10 yr, I think we can today. "
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