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MBS MID-DAY: Slight Extension Of Yesterday's Weakness
Posted to: MBS Commentary
Wednesday, November 21, 2012 11:08 AM

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MBS Live: MBS Morning Market Summary
Trading so far today has represented a slight extension of yesterday's weakness and hopefully, that's all!  Looking at price movements beyond today is a bit depressing as the entire week has been a downtrend for MBS and an uptrend for Treasury yields.  The day-over-day change in MBS (2-3 ticks at the moment) seems minimal, but is somewhat deceiving considering we went out at the weakest levels of the day yesterday.  From yesterday's rate sheet time, we're down about three-eighths of a point.  So yes, a slight extension of yesterday's weakness, but yesterday was pretty weak!  At the moment, we're eyeing yesterday's lows as a short term inflection point, hoping NOT to see yesterday's floor become today's ceiling, though that's exactly what's been happening so far today.  Economic data has done little if anything to inform that movement as markets are more driven by trade-flows and somewhat distorted by waning pre-holiday illiquidity.  There's a 10yr TIPS auction to take down at 11:30am as well, which could have more of an impact than the econ data.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
104-21 : -0-02
FNMA 3.5
106-11 : -0-01
FNMA 4.0
106-27 : -0-02
FNMA 4.5
107-20 : +0-01
GNMA 3.0
106-03 : -0-03
GNMA 3.5
108-10 : -0-02
GNMA 4.0
109-03 : -0-02
GNMA 4.5
108-22 : +0-01
FHLMC 3.0
104-09 : -0-03
FHLMC 3.5
105-30 : -0-02
FHLMC 4.0
106-10 : -0-03
FHLMC 4.5
106-29 : +0-00
Pricing as of 11:08 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.

10:50AM  :  ECON: Consumer Sentiment Slightly Lower Than Expected
- 82.7 vs 84.5 consensus
- Expectations 77.6 vs 80.1

- (Reuters) - U.S. consumer sentiment stalled at the end of November as uncertainty grew over federal tax and spending programs next year, a survey released on Wednesday showed.

The Thomson Reuters/University of Michigan's final reading on the overall index on consumer sentiment came in at 82.7, a touch up from 82.6 the month before, but down from a preliminary reading of 84.9 released earlier in the month.

It was below the median forecast of 84.5 among economists polled by Reuters.

"The late-month retreat was accompanied by more economic uncertainty about future federal taxes and spending programs and the inability of the political parties to reach a settlement," survey director Richard Curtin said in a statement.
10:04AM  :  ALERT ISSUED: MBS Risk Running Into Ceiling At Yesterday's Lows
It's been a mostly unpleasant morning so far with some potentially disconcerting price action in MBS. Fannie 3.0s are currently struggling to get back above yesterday afternoon's lows. Even though we came in at 104-23, we quickly moved lower and have since seen several instances of resistance at 104-22, the same level that provided a firm floor of support yesterday afternoon. That's a classic ratcheting technical movement that, at the very least, sets up 104-22 as an important level to watch for the rest of the day.

Things are somewhat similar in Treasuries, though the weakness is slightly more pronounced. Bond markets showed their hand early in the overnight session after Germany's Schaeuble said that there is no agreement coming this week on Greece and that Eurozone Finance ministers would meet again on Monday. At first, markets took the news poorly with equities futures dropping 10 S&P points in the blink of an eye. 10yr yields were a bit more sober in response, merely shedding 3bps. But it's the bounce that's more telling.

After losing ground initially on that news, bond yields and stocks both began rising steadily. Stocks leveled off somewhat into the domestic open and Treasuries did not (although they might be now, fingers crossed). The pops in price action and volume came NOT on the economic data, but rather were purely driven by tradeflows. Bottom line, accounts are lightening up on positions heading into what, for many, will be a four day weekend.

Please note, that does NOT mean we should simply tune out and disregard the negative price action today, hoping that everything will "go back to the way it was" on Monday. The unfortunate reality is that things can always go either way. Even if there's a temptation to "hope" that things turn around when markets get back to business next week, they'll be doing so from a point of greater neutrality, leaving the door equally open to re-engage longs or continue the sell-off.
9:07AM  :  ECON: Markit PMI Slightly Higher
- PMI 52.4 vs 51.0 Consensus

Key points:
  • PMI signals moderate improvement in manufacturing business conditions
  • Both output and new order growth quicken to five-month highs
  • Strongest rise in employment since July
  • Average input prices increase markedly
The Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ (PMI™)1 signalled the strongest improvement in U.S. manufacturing business conditions for five months in November. The preliminary ‘flash’ PMI reading, which is based on around 85% of usual monthly replies, rose to 52.4 from 51.0 in October to indicate a moderate manufacturing expansion overall.

PMI index readings above 50.0 signal an increase or improvement on the prior month, while readings below 50.0 indicate a decrease.
8:41AM  :  ECON: Jobless Claims 410k, In Line With Expectations
- 410k vs 410k Consensus
- Previous week revised higher to 451k from 439k
- Continued Claims Fell to 3.337 mil vs 3.345 mil Consensus
- Claims still distorted by Hurricane Sandy

In the week ending November 17, the advance figure for seasonally adjusted initial claims was 410,000, a decrease of 41,000 from the previous week's revised figure of 451,000. The 4-week moving average was 396,250, an increase of 9,500 from the previous week's revised average of 386,750.

The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending November 10, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending November 10 was 3,337,000, a decrease of 30,000 from the preceding week's revised level of 3,367,000. The 4-week moving average was 3,285,000, an increase of 19,500 from the preceding week's revised average of 3,265,500.
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.

BVG  :  "Good to have a lender that allows locking on weekends---just in case of increased turmoil/Company tapebomb, etc"
Adam Quinones  :  "where is the LIKE button...."
Matthew Graham  :  "adding final 2 cents to previous convo, bottom line, there are only ever "probably's," but those aren't the kinds of things I'd want to lean on in making much of a change to my overall lock float strategy. Highest/Best use of this site is INTRADAY reprice risk. How you lock/float over the weekend is a much more individual decision and one that I couldn't speak to without saying that there's ALWAYS a risk that things keep getting worse,"
Ira Selwin  :  "Half day on Friday - early market close"
Ira Selwin  :  "Technically a full day, but half day for alot of people"
Joe Probst  :  "Is this a half day? And if I don't get a chance to tell everybody. Have a safe and happy Thanks Giving.."
Michael Gillani  :  "I agree with you MG. GUTFLOP it is! I have lived by that over the past year + and it has served me very well!"
Matthew Graham  :  "now you're talkin"
Ken Crute  :  "GUTFLOP "
Matthew Graham  :  "again... there's no way to say such a thing because there's no way to get that consensus without soliciting the input from every member. Even then, it's foolish to base your own pipeline decisions on the perception of the majority stance."
Gus Floropoulos  :  "MBS Live consensus is to FLOAT"
Tom Schwab  :  "agreed, waiting until Monday allows Greek issues and Gaza strip to possibly help as well as traders coming back form vacation"
Matt Hodges  :  "i wouldn't be locking today, personally"
Jason York  :  "I would agree with that statement, unless you have something that doesn't have time"
Michael Gillani  :  "So is it somewhat safe to say that Monday will be the next real trading day and it's safe to float most likely if not already locked?"
Matthew Graham  :  "problem is that they all took their long positions with them just before they left."
Lion  :  "MG-What markets, everyone's gone home already"
Matthew Graham  :  "and we weren't really expecting it to"
Matthew Graham  :  "market's not trading the econ data. "
Michael Gillani  :  "I know PMI was slightly better than expected, but with jobless claims still over 400k and last weeks already year high number revised 20k higher, how is the market taking a positive spin?"
Matthew Graham  :  "RTRS- U.S. BANKRUPTCY COURT APPROVES SALE OF RESCAP MORTGAGE SERVICING AND ORIGINATION PLATFORM ASSETS TO OCWEN AND WALTER INVESTMENT, AND SALE OF WHOLE LOAN PORTFOLIO TO BERKSHIRE HATHAWAY "
Matthew Graham  :  "RTRS - MARKIT U.S. MANUFACTURING FLASH PMI, OUTPUT AND NEW ORDERS INDEXES AT HIGHEST SINCE JUNE "
Matthew Graham  :  "RTRS- MARKIT U.S. MANUFACTURING SECTOR FLASH PMI INDEX FOR NOVEMBER AT 52.4 (CONSENSUS 51.0) VS OCTOBER FINAL 51.0 "
Jeff Anderson  :  "GM, all. Greek talk issues not having much impact today. Happy Early Bird Day everyone!"
Matthew Graham  :  "RTRS- US LABOR DEPT SAYS JOBLESS CLAIMS STILL DISTORTED BY HURRICANE SANDY, STATES STILL FILING EXCESS CLAIMS AS RESULT OF STORM "
Matthew Graham  :  "RTRS- US CONTINUED CLAIMS FELL TO 3.337 MLN (CONS. 3.345 MLN) NOV 10 WEEK FROM 3.367 MLN PRIOR WEEK (PREV 3.334 MLN) "
Matthew Graham  :  "RTRS- US JOBLESS CLAIMS 4-WK AVG ROSE TO 396,250 NOV 17 WEEK, HIGHEST SINCE NOV 2011, FROM 386,750 PRIOR WEEK (PREVIOUS 383,750) "
Matthew Graham  :  "RTRS - US JOBLESS CLAIMS FELL TO 410,000 NOV 17 WEEK (CONSENSUS 410,000) FROM 451,000 PRIOR WEEK (PREVIOUS 439,000) "

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