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MBS MID-DAY: Pressure From Stocks, Supply, Positions
Posted to: MBS Commentary
Thursday, April 12, 2012 11:07 AM

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MBS Live: MBS Morning Market Summary
As mentioned in the alerts below, bond yields and stock prices moved in tandem with a high degree of correlation earlier this morning.  Even though bond markets had largely been holding on to yesterday's trading range, the passing of the 11am hour brings a few volatility inspiring events, including a continued stock market rally adding to the sense that the broader theme of "risk" may be reversing to our detriment.  Bond markets responded mostly negatively to the results of the Fed's scheduled "Twist" buying in the the 10yr maturity range, and underlying tradeflows are prompting more caution and discounting ahead of today's 30yr Bond Auction.  Bottom line, there are no classic "cause and effect" market movers in play at the moment.  Tradeflows and dealer positioning are behind the volatility.  
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.5
103-04 : -0-04
FNMA 4.0
105-08 : -0-03
FNMA 4.5
106-25 : -0-02
FNMA 5.0
108-15 : +0-00
GNMA 3.5
104-21 : -0-03
GNMA 4.0
107-23 : -0-03
GNMA 4.5
109-05 : -0-04
GNMA 5.0
110-28 : -0-02
FHLMC 3.5
102-29 : -0-03
FHLMC 4.0
104-30 : -0-02
FHLMC 4.5
106-11 : -0-02
FHLMC 5.0
107-32 : +0-01
Pricing as of 11:07 AM EST
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.

10:16AM  :  Freddie Mac: 15YR Fixed-Rate Mortgage Hits Record Low
&rauquo;30-year fixed-rate mortgage (FRM) averaged 3.88 percent with an average 0.7 point for the week ending April 12, 2012, down from last week when it averaged 3.98 percent. Last year at this time, the 30-year FRM averaged 4.91 percent.

&rauquo;15-year FRM this week averaged 3.11 percent with an average 0.7 point, down from last week when it averaged 3.21 percent. A year ago at this time, the 15-year FRM averaged 4.13 percent.

&rauquo;5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.85 percent this week, with an average 0.7 point, down from last week when it averaged 2.86 percent. A year ago, the 5-year ARM averaged 3.78 percent.

&rauquo;1-year Treasury-indexed ARM averaged 2.80 percent this week with an average 0.6 point, up from last week when it averaged 2.78 percent. At this time last year, the 1-year ARM averaged 3.25 percent.
10:07AM  :  ALERT ISSUED: Bond Markets Under Pressure From Stock Lever.
After rallying earlier on this morning's economic data, bond markets have reversed course to head back to unchanged levels from yesterday's close.

The stock lever had been in play most of the morning, and indeed coincided with the first bounce (weaker for bonds, stronger for stock futures) around 8:45am. Since the cash open, stocks have been on a tear higher, closing in on a 10pt gain in S&P futures from lows to highs. Treasuries resisted following at first but have since capitulated, at least to some extent.

10 yr yields are up to the mid 2.03's and Fannie 3.5 MBS fell to 103-07, but have put in a decent support bounce and moved up a few ticks to 103-09. The immediate, small-scale fate of bond markets seems like it will continue to be somewhat tied to the stock lever. This relationship could easily break down as the auction approaches, but for now, if stocks look to be bouncing weaker, Treasuries and MBS should be able to hold their recent supportive lines of defense.
9:21AM  :  ALERT ISSUED: Bond Markets Improve After Morning Data, But Meet Resistance
In terms of the trading range, the overnight session was mostly uneventful if slightly weaker. Comments from Fed's Dudley did little to slow down a rise in yields into the domestic open. He did, however, mention what many have been thinking in likening the recent swath of upbeat economic data to similar bullish runs in the beginning of 2010 and 2011 that ultimately reversed in grand fashion later in the year. Well played William!

The biggest mover this morning has been the 830am trio of economic data. Jobless Claims were much higher than expected, and as per usual, the previous week was revised higher. International Trade showed a smaller than expected trade deficit with another record for exports and the lowest oil imports since 1997. Producer Prices showed decelerating inflation at the producer level owing largely to lower fuel prices.

All of the above, but mostly the Jobless Claims are bond bullish. We noted in "The Day Ahead" (linked below) that Jobless Claims would be most interesting if it reiterated the point made by last week's surprise miss on NFP. It seems to have done that to some extent, but it also looks as if markets would like to see what else the day has to offer before engaging in utter rally mode.

10yr yields fell tom roughly 2.04 to 2.015 and haven't looked willing to go much lower, bouncing up into the 2.02's recently. Fannie 3.5 MBS (which had another HUGE day of focused origination yesterday) rose from 103-05 to 103-12, 5 ticks higher on the day.

There's Fed Twist buying coming up from 10:15-11:00 (slightly supportive) and the 30yr Bond Auction at 1pm as well as plenty of Fed Speakers. Markets seem content to have rallied a bit so far this morning, but may be waiting to digest some of this afternoon before making firmer commitments to trading in one direction or another.
8:49AM  :  ECON: Trade Deficit Lower Than Expected, Oil Lowest Since 1997
*Trade Deficit $46.03 bln vs $52.00 bln consensus
*US/China Deficit lowest since March 2011
* OPEC Trade Deficit lowest since Oct 2010
*Crude Oil Imports lowest since Feb 1997

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total February exports of $181.2 billion and imports of $227.2 billion resulted in a goods and services deficit of $46.0 billion, down from $52.5 billion in January, revised. February exports were [forwardfullbody].2 billion more than January exports of $180.9 billion. February imports were $6.3 billion less than January imports of $233.4 billion.

In February, the goods deficit decreased $6.0 billion from January to $61.4 billion, and the services surplus increased [forwardfullbody].5 billion from January to $15.4 billion. Exports of goods decreased [forwardfullbody].6 billion to $128.0 billion, and imports of goods decreased $6.5 billion to $189.4 billion. Exports of services increased [forwardfullbody].8 billion to $53.2 billion, and imports of services increased [forwardfullbody].2 billion to $37.8 billion.

The goods and services deficit increased [forwardfullbody].6 billion from February 2011 to February 2012. Exports were up $15.4 billion, or 9.3 percent, and imports were up $16.1 billion, or 7.6 percent.
8:43AM  :  ECON: PPI Flat on Lower Than Expected Energy Costs
*PPI 0.0 vs +0.3 consensus
*Core PPI +0.3 vs +0.2 consensus
* Energy -1.0, Gasoline -2.0, Heating Oil -1.2

The Producer Price Index for finished goods was unchanged in March, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Finished goods prices rose 0.4 percent in February and 0.1 percent in January. At the earlier stages of processing, prices received by manufacturers of intermediate goods climbed 0.7 percent in March, and the crude goods index declined 2.5 percent. On an unadjusted basis, prices for finished goods moved up 2.8 percent for the 12 months ended March 2012, the smallest year-over-year increase since a 2.7-percent rise in June 2010.
8:36AM  :  ECON: Jobless Claims Highest Since January
* Claims up to 380k vs 355k consensus

In the week ending April 7, the advance figure for seasonally adjusted initial claims was 380,000, an increase of 13,000 from the previous week's revised figure of 367,000. The 4-week moving average was 368,500, an increase of 4,250 from the previous week's revised average of 364,250.

The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending March 31, unchanged from the prior week's unrevised rate of 2.6 percent.

The advance number for seasonally adjusted insured unemployment during the week ending March 31 was 3,251,000, a decrease of 98,000 from the preceding week's revised level of 3,349,000. The 4-week moving average was 3,334,250, a decrease of 35,750 from the preceding week's revised average of 3,370,000.
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.

Ira Selwin  :  "thanks Brandon!"
Brandon Stewart  :  "5th 3rd is 4 days for purchase and 17 days for refis and 72 hours on conditions"
Tony Cardinal  :  "yea, Ira. pricing is comprable"
Jason Adams  :  "they have been off lately but I think it is to control the volume. Our rep was in last week and said they are ramping staff to improve turn times"
Jason Adams  :  "we are not delegated with 5th at this time. We are with Flagstar. "
Ira Selwin  :  "What abuot their pricing, are they in line with everyone else?"
John Rodgers  :  "Jason, are you delegated with 53? "
Tony Cardinal  :  "i do not, sorry."
Ira Selwin  :  "You know anything about their turnaround time for purchase of closed loans?"
Tony Cardinal  :  "turn times are pretty rough JA"
Jason Adams  :  "They are really behind right now U/W from 3/19"
Ira Selwin  :  "How is it dealing with them ?"
Jason Adams  :  "Ira, my company is corr. with 5th"
Jason York  :  "I wouldn't lock until he sends everything back, and let him know he isn't locked until he does, so his rate could be higher"
Jill Statz  :  "make him come to the office to sign all docs"
John Rodgers  :  "A little help here: I did a loan for a guy in early 2010. He has a 5.5% rate on a VA 30 year loan. In late 2010 then again in 2011 he wanted to refi but in both cases he never sent back his paperwork thus killing both deals. So he emails me again last night and wants to refi. Do I tell him I'm not interested or waste another lock and set of respas on him?"
Ira Selwin  :  "Anyone here have experience with 5/3 on the corresopndent side? Curious to hear any experiences with them."
Adam Quinones  :  "it's a start"
Geoff Allison  :  "So with a seemingly large interest in these bonds this could be a good thing as far as larger audience?"
Adam Quinones  :  "These are HARP 2.0 125%+ loans"
Adam Quinones  :  "this is a big deal!"
Adam Quinones  :  "...look at this paper as the first round of non-vanilla MBS"
Adam Quinones  :  "BAML says they traded 10-20/32 off CQs "
Adam Quinones  :  "From Fannie Mae's Sales Desk: "In mortgages, we saw $465mm of 30-year greater than 125% LTV bonds (FN CR and FR U9) forward traded (June settle) from two different originators. The bonds were well bid with interest from money managers, REITS, and primary dealers. The high LTV loans will not be able to be pooled until June and dealer expectations are that there will be between $1-2bln in production per month. Threfore it will be interesting to see how these bonds are bid going forward. ""
Michael Francis  :  "around 700 layoffs coming at Saxon...."
Andy Pada  :  "more layoffs to come in the financial industry"
Matthew Graham  :  "RTRS - US FEB VOLUME OF CRUDE OIL IMPORTS LOWEST SINCE FEB 1997 "
Matthew Graham  :  "RTRS - US FEB OIL IMPORT PRICE $103.63/BBL VS JAN $103.81/BBL, +18.9 PCT FROM FEB'11 $87.17/BBL "
Matthew Graham  :  "RTRS - US FEB EXPORTS RECORD HIGH $181.16 BLN VS JAN $180.92 BLN, IMPORTS $227.19 BLN VS JAN $233.44 BLN "
Matthew Graham  :  "RTRS - US FEB TRADE DEFICIT $46.03 BLN (CONSENSUS $52.00 BLN) VS JAN DEFICIT $52.52 BLN (PREV $52.57 BLN) "
Matthew Graham  :  "RTRS - U.S. MARCH PPI ENERGY -1.0 PCT, GASOLINE -2.0 PCT, HEATING OIL -1.2 PCT "
Matthew Graham  :  "RTRS - U.S. MARCH YEAR-OVER-YEAR PPI +2.8 PCT, SMALLEST RISE SINCE JUNE 2010 (CONS +3.1 PCT); CORE +2.9 PCT (CONS +2.8 PCT) "
Matthew Graham  :  "RTRS - U.S. MARCH PPI EXFOOD/ENERGY +0.3 PCT (CONS +0.2 PCT) VS FEB +0.2 PCT "
Matthew Graham  :  "RTRS - U.S. MARCH PPI 0.0 PCT (CONSENSUS +0.3 PCT), VS FEB +0.4 PCT "
Matthew Graham  :  "RTRS - US INITIAL JOBLESS CLAIMS HIGHEST SINCE JAN 28, 2012; CONTINUED CLAIMS LOWEST SINCE MID-JULY 2008 "
Matthew Graham  :  "RTRS - US CONTINUED CLAIMS FELL TO 3.251 MLN (CON. 3.335 MLN) MARCH 31 WEEK FROM 3.349 MLN PRIOR WEEK (PREV 3.338 MLN) "
Matthew Graham  :  "RTRS - US JOBLESS CLAIMS 4-WK AVG ROSE TO 368,500 APRIL 7 WEEK FROM 364,250 PRIOR WEEK (PREVIOUS 361,750) "
Matthew Graham  :  "nailed it Jeff"
Matthew Graham  :  "RTRS - US JOBLESS CLAIMS ROSE TO 380,000 APRIL 7 WEEK (CONSENSUS 355,000) FROM 367,000 PRIOR WEEK (PREVIOUS 357,000) "
Matthew Graham  :  "i ALMOST put something about that in the Day Ahead Jeff!"
Jeff Anderson  :  "GM, all. What's the over/under on how much last weeks claims gets bumped up? I say up to 361k with this week at 358k so they can say the number went down again. It's cynical Thursday, apparently."

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Mortgage Rates:
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  • 15 Yr FRM 3.33%
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  • Jumbo 30 Year Fixed 4.04%
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Recent Housing Data:
  • Mortgage Apps -8.12%
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  • Refinance Index -10.20%
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  • Purchase Index -1.77%