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MBS MID-DAY: Boehner Comments Shake Things Up On Otherwise Slow Morning
Posted to: MBS Commentary
Thursday, November 29, 2012 11:54 AM

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MBS Live: MBS Morning Market Summary
The headline for this morning's mid-day recap began it's life referencing a sideways and uninspired trading session, but just before it went out the door, Speaker Boehner hit the wires with generally negative comments on Fiscal Cliff negotiations.  Until then, the session had indeed muddled sideways, both in terms of trading levels and in the more qualitative sense that bond markets simply lacked motivation and connectivity to the day's data and events.  The proposed alternative to being uninspired is to instead hang on each and every Fiscal Cliff headline that markets can digest (read more about that HERE).  How fortuitous then, that Boehner spoke just in time to reinforce that reality.  No sooner did his comments come out than stocks shed a rapid 7 points in the S&P.  Bond market reaction (as discussed in the link above), isn't as pitchy as that seen in equities, but prices noticeably rose at the same time--abruptly, but not by a great amount.  MBS had been a tick in the red and now they're a tick in the green.  10yr yields dropped from 1.63+ to 1.62.  Not huge moves and not enough to classify bond market trading as something other than sideways and grindy, but at least something to break that sense of "lacking motivation and connectivity." 
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
105-02 : +0-00
FNMA 3.5
106-19 : +0-01
FNMA 4.0
107-00 : +0-01
FNMA 4.5
107-21 : -0-01
GNMA 3.0
106-18 : +0-01
GNMA 3.5
108-20 : +0-02
GNMA 4.0
109-09 : +0-02
GNMA 4.5
108-25 : -0-01
FHLMC 3.0
104-22 : -0-01
FHLMC 3.5
106-07 : +0-01
FHLMC 4.0
106-14 : +0-01
FHLMC 4.5
106-29 : -0-02
Pricing as of 11:09 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.

10:10AM  :  ECON: Pending Home Sales Much Stronger Than Expected
- Index +5.2 pct vs +0.8 pct consensus
- From 99.6 in Sept to 104.8 in Oct, highest in more than 5 years

- Pending home sales rose strongly in October with mixed regional results, according to the National Association of Realtors.

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, increased 5.2 percent to 104.8 in October from an upwardly revised 99.6 in September and is 13.2 percent above October 2011 when it was 92.6. The data reflect contracts but not closings.

Lawrence Yun , NAR chief economist, said buyers are responding to favorable market conditions. "We've had very good housing affordability conditions for quite some time, but we're seeing more impact now from steady job creation, and rising consumer confidence about home buying now that home prices have clearly turned positive."

Outside of a few spikes during the tax credit period, pending home sales are at the highest level since March 2007 when the index also reached 104.8. On a year-over-year basis, pending home sales have risen for 18 consecutive months.
9:48AM  :  ALERT ISSUED: Bond Markets Struggle Near Unchanged Levels
Bond markets are exuding quite a bit of tension at the moment. Last week's sell-off was met with a decent push back this week, but it's been a weird, bumpy, unconvincing ride back to levels that clearly shied away from making any bold, bullish statements. Namely, 10yr yields were clear to avoid a technical break below 1.60 yesterday, which has been a prominent horizontal inflection point during November and also coincided yesterday with the upper limits of a bullish trend that had been intact from mid-October through last week.

When the price or yield of anything chartable breaks out of a trend and "returns to the scene of the crime" for a bounce on the other side of that trend-line, it builds a case that we've witnessed a meaningful breakout. But perhaps equally compelling are the few instances of supportive ceilings for bond yields with the most notable recent example seen in the overnight session at 1.644.

A moderately threatening onslaught of positive European data and auction results lifted the Euro and stock markets overnight, but German Bunds and US Treasuries--though obviously under pressure, managed to regularly defend horizontal levels (1.644 as noted in US 10's, and and even more highly technical series of bounces at 1.398 in Bunds).

It's not like the technical landscape of German Bunds at 1.398 is some epic development worthy of stopping the presses, but in the case of the overnight session, helps to provide a counterpoint to the concerns that arise from considering the technical resistance encountered yesterday.

The last time S&Ps were this high, 10yr yields were closer to 1.75, so bond markets are obviously trying to fight off the same level of emotional reaction to Fiscal Cliff headlines, but it's hard to know how good of a job they'll continue to do at this, especially after this traditionally supportive "month-end" week.

For now, both MBS and Treasuries have been able to hover around unchanged levels so far this morning after some volatility surrounding the GDP and Jobless Claims releases at 8:30. Stocks have opened slightly higher, and after hitting their own technical resistance at overnight highs, are just now edging higher. If that "risk-on" trend continues, it could reinforce the challenging landscape facing bond markets

Fannie 3.0s are currently exactly unchanged from 5pm levels at 105-02 and 10yr yields are over a bp higher than 3pm levels, but similarly unchanged from 5pm levels at 1.6318. Next economic data is Pending Home Sales at 10am, followed by another Fed Twist buyback at 10:15-11:00, with the last of the week's Treasury Note auctions at 1pm this afternoon.
8:49AM  :  ECON: Jobless Claims Slightly Higher Than Expected
- Jobless Claims 393k vs 390k Consensus
- Previous week revised higher from 410k to 416k

- In the week ending November 24, the advance figure for seasonally adjusted initial claims was 393,000, a decrease of 23,000 from the previous week's revised figure of 416,000. The 4-week moving average was 405,250, an increase of 7,500 from the previous week's revised average of 397,750.

The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending November 17, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending November 17 was 3,287,000, a decrease of 70,000 from the preceding week's revised level of 3,357,000. The 4-week moving average was 3,296,250, an increase of 6,250 from the preceding week's revised average of 3,290,000.
8:43AM  :  ECON: GDP Slightly Lower Than Expected, Consumer Spending Decelerates
- GDP +2.7 vs +2.8 consensus
- Final Sales +1.9 vs +2.5 consensus
- Consumer Spending +1.4, smallest rise since Q211
- Business Inventory change accounts for .77 of GDP

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.7 percent in the third quarter of 2012 (that is, from the second quarter to the third quarter), according to the "second" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.3 percent.

The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 2.0 percent (see "Revisions" on page 3).

The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, federal government spending, residential fixed investment, and exports that were partly offset by negative contributions from nonresidential fixed investment and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased slightly.

The acceleration in real GDP in the third quarter primarily reflected upturns in private inventory investment and in federal government spending, a deceleration in imports, an acceleration in residential fixed investment, and a smaller decrease in state and local government spending that were partly offset by a downturn in nonresidential fixed investment and decelerations in exports and in PCE.
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.

Victor Burek  :  "we went conventional and didnt have to wait"
Victor Burek  :  "just had a similar loan close this week, fha had to wait 6 months, but we didnt going conventional"
Roger Moore  :  "had to wait 5 months to do the deal"
Jason York  :  "didn't work with FHA Roger?"
Jason Anker  :  "conv should be ok"
Roger Moore  :  "i've run into that with FHA, but not conventional"
Jason York  :  "scenario help - customer was laid off from his engineering job in CA in 5/2011, just got hired for a new engineering job with the DoD here in VA. I'm being told that he has to have 6 months back to work, since it would be considered re-entry. I was thinking that since he was going back in the same field and w-2, then he should be fine, but I guess I'm wrong? Is there any difference between conventional or FHA on that note?"
Matthew Graham  :  "RTRS- U.S. OCT PENDING HOME SALES INDEX +5.2 PCT (CONSENSUS +0.8 PCT) TO 104.8- REALTORS"
Matthew Graham  :  "RTRS- DUDLEY: WILL ASSESS EMPLOYMENT, INFLATION OUTLOOK TO DETERMINE WHETHER TREASURY PURCHASES SHOULD CONTINUE IN 2013 "
Matthew Graham  :  "RTRS - US FED'S DUDLEY: RECENT PICK-UP IN JOBS GROWTH 'INSUFFICIENT TO MATERIALLY CHANGE THE LABOR MARKET PICTURE' "
Matt Hodges  :  "not a large number, but Living Social will be laying off 400 today"
Matthew Graham  :  "RTRS- US JOBLESS CLAIMS FELL TO 393,000 NOV 24 WEEK (CONSENSUS 390,000) FROM 416,000 PRIOR WEEK (PREVIOUS 410,000) "
Matthew Graham  :  "RTRS- US Q3 BUSINESS INVENTORY CHANGE ADDS 0.77 PERCENTAGE POINT TO GDP CHANGE "
Matthew Graham  :  "RTRS- US Q3 BUSINESS INVENTORY CHANGE +$61.3 BLN (PREV +$34.1 BLN) "
Matthew Graham  :  "RTRS - US PRELIM Q3 GDP DEFLATOR +2.8 PCT (CONS +2.8 PCT), PREV +2.9 PCT "
Matthew Graham  :  "RTRS - US Q3 CONSUMER SPENDING +1.4 PCT, SMALLEST RISE SINCE Q2 2011, (PREV +2.0 PCT), DURABLES +8.7 PCT (PREV +8.5 PCT) "
Matthew Graham  :  "RTRS - US PRELIM Q3 GDP +2.7 PCT (CONSENSUS +2.8 PCT), PREV +2.0 PCT; FINAL SALES +1.9 PCT (CONS +2.5 PCT), PREV +2.1 PCT "
Andy Pada  :  "DeMarco's statement yesterday seems to open the door to different approach to the GSEs."
Christopher Stevens  :  "GM all. Headline of todays WSJ: Fed Stimulus likely in 2013. And trhere is a decent article regarding the hidden benefits of the Feds bond buying binge."

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