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MBS MID-DAY: Disconcerting Resistance After Morning Gains
Posted to: MBS Commentary
Tuesday, January 29, 2013 11:07 AM

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MBS Live: MBS Morning Market Summary
Treasuries were slightly weaker during the first part of the overnight session, but stayed under Monday's higher yields.  European hours brought lower stock prices and a slow grind to lower yields in Treasuries that extended into the morning hours.  MBS came in the door in moderately improved territory and added several ticks before running into resistance at Friday morning's lows.  Treasuries similarly encountered resistance before moving past an inflection zone  marked by Friday's highest yields.  This rather disconcerting technical development was reinforced as the the Fed's scheduled QE4 buying ended and an equities rally pulled bond markets back from their better levels of the morning as we head into the 11am hour.  MBS and Treasuries are now favoring a weaker stance heading into the 5yr Treasury Auction.
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
103-14 : -0-01
FNMA 3.5
105-16 : -0-01
FNMA 4.0
106-08 : -0-01
FNMA 4.5
107-12 : +0-01
GNMA 3.0
104-13 : +0-01
GNMA 3.5
107-17 : +0-01
GNMA 4.0
108-23 : -0-02
GNMA 4.5
109-06 : +0-03
FHLMC 3.0
103-01 : -0-01
FHLMC 3.5
105-07 : -0-01
FHLMC 4.0
105-32 : -0-01
FHLMC 4.5
106-15 : -0-01
Pricing as of 11:06 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.

10:38AM  :  Bond Markets Moderately Improved, Facing Tough Resistance
Bond markets began the overnight session with a "risk-on" move during Asian hours as both Treasury yields and equities futures moved back towards Monday morning levels. 10's never went over 1.99 though, and began easing gently lower into domestic hours, helped along by a bit of a "risk-off" move during European hours.

This got MBS and Treasuries in the door just barely in the green and though we slipped back briefly into the red, the weakness was short-lived. That said, there hasn't been a triumphant romp back into stronger territory either... Fannie 3.0s are up 2 ticks at 103-16 and 10yr yields down half a bp at 1.9696.

Consumer Confidence was much weaker-than-expected, but has had minimal impact outside some volatility in equities. Perhaps markets are willing to discount the data as greatly affected by payroll tax changes (this is suggested in the report itself).

Whatever the case, it's disconcerting to see trading levels shy away from resistance levels so far this morning as they mark noticeable pivot points with Friday's weakest levels (MBS were a bit weaker on Friday afternoon, but they had wilted quite a bit vs TSYs into the weekend, and there was a prominent low at 103-18 in the morning, now today's high).

So we'll keep a close eye on these pivot points (103-18 in MBS and 1.95 in 10yr yields for the rest of the session. Scheduled Fed QE4 buying is going on at the moment and the 5yr Auction results hit at 1pm. The green is good, but the absence of a break through the aforementioned resistance levels is a bit ominous so far. Stay on guard.
10:10AM  :  ECON: Consumer Confidence Much Lower Than Expected (Corrected)
(corrects headline confidence to 58.6)

- Confidence 58.6 vs 64.0 Consensus
- "Present Situation" 57.3 vs 64.6 previously
- "Expectations" 59.5 vs 68.1 previously
- Confidence and Expectations Lowest since late 2011
- "Jobs hard-to-get" rises for first time since September


The monthly Consumer Confidence Survey®, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a leading global provider of information and analytics around what consumers buy and watch. The cutoff date for the preliminary results was January 17.

Says Lynn Franco, Director of Economic Indicators at The Conference Board: “Consumer Confidence posted another sharp decline in January, erasing all of the gains made through 2012. Consumers are more pessimistic about the economic outlook and, in particular, their financial situation. The increase in the payroll tax has undoubtedly dampened consumers’ spirits and it may take a while for confidence to rebound and consumers to recover from their initial paycheck shock.”
10:07AM  :  ECON: Consumer Confidence Much Lower Than Expected
- Confidence 58.6 vs 64.0 Consensus
- "Present Situation" 57.3 vs 64.6 previously
- "Expectations" 59.5 vs 68.1 previously
- Confidence and Expectations Lowest since late 2011
- "Jobs hard-to-get" rises for first time since September


The monthly Consumer Confidence Survey®, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a leading global provider of information and analytics around what consumers buy and watch. The cutoff date for the preliminary results was January 17.

Says Lynn Franco, Director of Economic Indicators at The Conference Board: “Consumer Confidence posted another sharp decline in January, erasing all of the gains made through 2012. Consumers are more pessimistic about the economic outlook and, in particular, their financial situation. The increase in the payroll tax has undoubtedly dampened consumers’ spirits and it may take a while for confidence to rebound and consumers to recover from their initial paycheck shock.”
9:13AM  :  ECON: Case Shiller Home Prices As Expected, Weaker Non-Adjusted
- 20 city, adjusted +0.6, as expected
- Non-adjusted -0.1 vs 0.0 consensus
- Previous report revised to -0.2, non-adjusted
- Market reaction

Data through November 2012, released today by S&P Dow Jones Indices for its S&P/Case-Shiller Home Price Indices, showed home prices rose 4.5% for the 10-City Composite and 5.5% for the 20-City Composite in the 12 months ending in November 2012.
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  :  ""A" can change"
Ira Selwin  :  "Actually, "block 1" cannot cvhange"
Ross Miller  :  "would that allow for an increase in block 1 if the value comes in higher then expected."
Ted Rood  :  "If it changes the pricing adjustments, not if it doesn't and you just want to add a few points."
Ross Miller  :  "Is a change in appraised valure considered a change of circumstance for block 1 on a borrower paid transaction?"
Matthew Graham  :  "payroll tax increase and initial paycheck shock says Conference board's Franco"
Victor Burek  :  "sure seems the markets dont care"
Matthew Graham  :  "RTRS- CONFERENCE BOARD JOBS HARD-TO-GET INDEX RISES FOR FIRST TIME SINCE SEPTEMBER"
Matthew Graham  :  "RTRS- CONFERENCE BOARD CONSUMER CONFIDENCE INDEX AT LOWEST SINCE NOV 2011 "
Matthew Graham  :  "RTRS- US JOBS HARD-TO-GET INDEX 37.7 IN JAN VS DEC REVISED 36.1 (PREVIOUS 35.6)--CONFERENCE BOARD "
Matthew Graham  :  "RTRS - US CONSUMER EXPECTATIONS INDEX 59.5 IN JAN VS DEC REVISED 68.1 (PREVIOUS 66.5) - CONFERENCE BOARD "
Matthew Graham  :  "RTRS- US CONSUMER PRESENT SITUATION INDEX IN JAN 57.3 VS DEC REVISED 64.6 (PREVIOUS 62.8)"
Matthew Graham  :  "RTRS - US JANUARY CONSUMER CONFIDENCE INDEX 58.6 (CONSENSUS 64.0) VS DECEMBER REVISED 66.7 (PREVIOUS 65.1) - CONFERENCE BOARD "
Ted Rood  :  "He's certinly doing his viewing audience a huge disservice by making them think rates are ANYWHERE near that low."
Ted Rood  :  "No, implied it, but didn't say it. I found that interesting."
Mike Drews  :  "he didn't say fixed"
Ted Rood  :  "Breaking news: Jim Cramer just announced that he got a "30 year mortgage at 2.75%". Who says rates have gone up???"
Matt Hodges  :  "good news, likely not effective for at least 60 days, and that's from pulling case number, not closing"
Matt Hodges  :  "i hear that FHA's ML could hit this week on permanent MI, increase in 10 bps and 5% down on $625,500+ loans"
Jeff Anderson  :  "NYC the only city with a year over year drop. Hitting those making over $400k in new taxes should help that, right?"
Matthew Graham  :  "RTRS- US NOV HOME PRICES IN 10 METROPOLITAN AREAS +4.5 PCT FROM YEAR AGO - S&P/CASE-SHILLER"
Matthew Graham  :  "RTRS - US NOV 20-METRO AREA HOME PRICES -0.1 PCT NON-ADJUSTED (CONSENSUS 0.0) VS REVISED -0.2 PCT IN OCT-S&P/CASE-SHILLER "
Matthew Graham  :  "RTRS- US NOVEMBER HOME PRICES IN 20 METRO AREAS +0.6 PCT SEASONALLY ADJ (CONSENSUS +0.6) VS REVISED +0.6 IN OCTOBER- S&P/CASE-SHILLER "
Gus Floropoulos  :  "funny thing is they r talking about the 10 yr only getting to 2.5-2.75"

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