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You are viewing Micro News from Tuesday, Jun 7, 2011 - View all recent Micro News
  • 6/7/11
    The Day Ahead: $21bn 10s and Beige Book
    The day ahead is highlighted by two events: a $21bn 10yr note auction at 1pm and the release of the Beige Book at 2pm eastern. Our current view supports strong auction results tomorrow but we would expect interest rates to display weakness early in the day as traders look to build-up a concession against expensive Treasury prices. In terms of economic data, Reuters writes...Economists expect to see the weakest Beige Book report since the beginning of the year, and will be watching for signs of a crisis of confidence, which the economy can ill afford when payroll growth has fallen below the rate necessary to chip away at unemployment. This latest collection of anecdotes from the Fed is expected to underscore that a slowdown is making itself apparent across a broad range of indicators, with the labor market suddenly turning softer than expected and manufacturing growth seeming to flatten. While the slowdown itself is certainly no surprise, the report could offer a clue as to how long the weakness will last. Some economists believe the recovery may be entering an inflection point of sorts, with the ISM non-manufacturing index implying stronger growth than the ISM manufacturing index for the first time since the recovery began. Also on the Fed calendar, Federal Reserve Bank of Kansas City President Thomas Hoenig speaks before a luncheon of business and community leaders. DAY AHEAD VIDEO: http://www.reuters.com/video/2011/06/07/the-day-ahead-june?videoId=211732309&videoChannel=5
    Category: MBS, FED, ECON
    Share:   
  • 6/7/11
    Just as they did yesterday afternoon, "rate sheet influential...
    MBS Updates are a service provided to MBS Live! subscribers only.
    Learn More | Start a Free Trial | View MBS Prices
    Category: MBS, alert
    Share:   
  • 6/7/11
    Bernanke Glum on Growth; No Hint of More Stimulus
    (Reuters) - Federal Reserve Chairman Ben Bernanke on Tuesday acknowledged a slowdown in the economy but offered no suggestion the central bank is considering any further monetary stimulus to support growth. He also issued a stern warning to lawmakers in Washington who are considering aggressive budget cuts, saying they have the potential to derail the economic recovery. A recent spate of weak economic data, capped by a report on Friday showing U.S. employers expanded payrolls by a meager 54,000 workers last month, has renewed investor speculation that the economy could need more help from the Fed. "U.S. economic growth so far this year looks to have been somewhat slower than expected," Bernanke said in remarks prepared for delivery at a banking conference in Atlanta. "A number of indicators also suggest some loss in momentum in labor markets in recent weeks," he added. However, Bernanke argued the latest bout of weakness would likely not last very long, and should give way to stronger growth in the second half of the year. Citing a recent spike in U.S. inflation, Bernanke said it was a worrisome trend but, like the economic softness, he predicted the trend would be transitory. He argued that weak growth in wages along with stable inflation expectations gave him comfort that the economy was under no immediate threat of an upward price spiral. On the budget, Bernanke repeated his call for a long-term plan for a sustainable fiscal path, but warned politicians against massive short-term reductions in spending. "A sharp fiscal consolidation focused on the very near term could be self-defeating if it were to undercut the still-fragile recovery," Bernanke said.
    Category: MBS, FED, ECON
    Share:   
  • 6/7/11
    Following a strong 3yr Treasury note auction, trading...
    MBS Updates are a service provided to MBS Live! subscribers only.
    Learn More | Start a Free Trial | View MBS Prices
    Category: MBS, alert
    Share:   
  • 6/7/11
    Auction Results: Aggressive Demand for 3s
    Treasury just auctioned $32-billion 3-year notes. Demand was strong for this issue, even at expensive prices. That is illustrated via an above-average "bid to cover" ratio, which came at 3.28 bids submitted for every 1 accepted by Treasury. This maintains strong demand in the last four 3yr note auctions. The high-yield produced by bidding in the actual auction was also 0.8 basis points below the 1pm "When Issued" yield . This is another sign of a strong buyer appetite. Dealers were the big winner in this one with a 55% award or $17.7bn of the $32bn offered. That is well-above average for primary dealers. Indirect accounts gave a little extra support as well with a 36% take-down. Directs on the other hand showed little motivation on all fronts. Based on the aggressive price bidding, even at expensive levels, it appears that primary dealers, the major supportive influence in today's auction, we're short 3-yr note inventory and needed to cover their "short positions" (or close flatteners/curve spread trades). We'd expect similar behavior in tomorrow's 10yr note auction. "Short covering" is when a bearish trader closes a position that was opened with the intention of capitalizing on lower prices/higher yields (or a flattener position). The term "short" describes the trader's directional bias. "Covering" simply means closing the position was closed.
    Category: MBS, FED
    Share:   
  • 6/7/11
    Fed-Speak: Cost of Living Expenses & Inflation Targeting; Lockhart
    Dennis Lockhart, president of the Atlanta Federal Reserve Bank, today spoke in support of an explicit inflation target. Lockhart said low and stable inflation is one of the underlying fundamentals that will shape the country's economic performance over the coming quarters and years. The concept of core inflation is part of the FOMC's policy discussion, not because it is an objective of monetary policy but because it is often an informative statistic. However, the objective of policy in the end has to be defined in terms real people experience—that is overall, or headline, inflation. This would include cost of living expenses such as food and energy. According to Lockhart, he would not hesitate to support an exit from the FOMC's current policy stance if he believed the headline inflation number of the past six months was indicative of the underlying trend inflation rate. He doesn't believe this to be the case. He said he is wary of tightening monetary policy in the face of quite ambiguous economic circumstances unless doing so is absolutely necessary to meet the FOMC's price stability mandate. The language the FOMC uses to explain its inflation forecasts can, at times, get in the way of effectively communicating its ultimate inflation objective. One way to deal with this tension (an approach employed by many central banks around the world) is to set an explicit numerical objective for inflation, also known as an inflation target. He supports the FOMC setting such a target. According to Lockhart, the specifics of an inflation target would need to be worked out by FOMC participants. But a few principles for an effective inflation target would be stating it in terms of some measure of overall, or headline, inflation and making it achievable over a realistic time frame. An appropriately constructed inflation target would not be in conflict with the FOMC's mandate to support employment.
    Category: MBS, FED, ECON
    Share:   
  • 6/7/11
    HUD Ready to Grant Neighorhood Rehab Funding
    WASHINGTON – The U.S. Department of Housing and Urban Development announced today that $3.6 million in Choice Neighborhoods Planning Grants will be awarded in fiscal year 2011 to assist in the transformation, rehabilitation and preservation of public housing and privately owned HUD-assisted housing. “Our Choice Neighborhoods Initiative rewards communities that use innovative tools to tackle concentrated poverty holistically,” said HUD Secretary Shaun Donovan. “The initiative expands on the bipartisan success of the HOPE VI program by recognizing that we must link affordable housing with quality education, public transportation, good jobs and safe streets. President Obama has said that there is no greater economic policy than one that invests in our children’s future and helps America out-educate the world. But that's not possible if we leave a whole generation of children behind in our poorest neighborhoods.” As part of HUD’s overall plan to revitalize areas of concentrated poverty, the Choice Neighborhoods Planning Grants are intended to help transform distressed public and assisted housing into sustainable, mixed-income housing that connects to key services, such as education and transportation, and supports positive outcomes for the neighborhood’s families. Eligible applicants are public housing authorities, local governments, nonprofit organizations, and for-profit developers that apply jointly with a public entity. Applicants must demonstrate their plan to revitalize the neighborhood through public-private partnerships that seek to develop high-quality public schools and early learning programs, public transportation, and improved access to jobs and well-functioning services. Applicants have until August 8, 2011 to apply for the Choice Neighborhoods Planning Grants. HUD anticipates awarding approximately 12 grants with a maximum award of $300,000 each.
    Category: INDUSTRY
    Share:   
  • 6/7/11
    "Rate sheet influential" MBS prices are revisiting...
    MBS Updates are a service provided to MBS Live! subscribers only.
    Learn More | Start a Free Trial | View MBS Prices
    Category: MBS
    Share:   
  • 6/7/11
    Goldman Offloads Servicing Business
    (Reuters) - Goldman Sachs Group Inc agreed to sell its beleaguered mortgage servicing unit for just over $600 million, putting an end to its ill-timed 3-1/2 year foray into a controversial corner of the U.S. housing market. Ocwen Financial Corp said on Monday it would buy Goldman's Litton Loan Servicing unit for $263.7 million in cash. Ocwen also agreed to pay off $337.4 million in Litton debt to Goldman, helped by a new $575 million loan from Barclays , which advised Ocwen on the deal. The deal gives Ocwen a mortgage servicing portfolio totaling $41.2 billion, mostly subprime mortgages made to U.S. borrowers with less than stellar credit. Mortgage service firms collect payments and handle foreclosures for mortgage owners or investors who hold securities backed by pools of mortgages. In a statement, Goldman said the sale price "does not reflect certain assets that Goldman Sachs will retain." The bank declined to specify those assets. Goldman bought Litton in 2007 for about $430 million, hoping to glean more information about the housing market to aid its mortgage-bond trading business. Shortly after the deal closed, the U.S. subprime housing market deteriorated to a far greater degree than most experts had expected. High levels of delinquencies and foreclosures have cut into profits of many servicing businesses. In recent months, sloppy foreclosure practices also have attracted growing regulatory attention -- and reams of bad publicity. (Reporting by Lauren Tara LaCapra, Knut Engelmann and Paritosh Bansal; editing by John Wallace, Tim Dobbyn and Carol Bishopric)
    Category: INDUSTRY
    Share:   
  • 6/7/11
    Fed-Speak: Fisher Wants to Focus on Fiscal Issues
    Richard Fisher is a Fed policy voter. His opinion matters more than a non-FOMC voter. Right now he doesn't support further Quantitative Easing. He is a "hawk". Instead he feels there is plenty of liquidity in the financial system and believes it is time to focus on national budget issues. (Reuters) - Dallas Federal Reserve President Richard Fisher said on Tuesday there was ample liquidity in the U.S. financial system and no need for the U.S. central bank to continue its extremely easy monetary policy. Interviewed on CNBC television, Fisher said U.S. businesses' balance sheets were in good shape and companies were awaiting clearer signs about how the economy will develop before they kick up the pace of hiring. "This is going to be a very slow process, and right now we need to get the fiscal side" lined up, Fisher said. Fisher, a voting member of the Fed's rate-setting Federal Open Market Committee, already is on record saying the central bank should not continue a bond-buying program. Its $600 billion second round of quantitative easing, known as QE2, ends this month. "What would more liquidity do? It's not being used. It's sitting on the sidelines. The gas tanks are full," he said. Fisher said he expects economic growth to accelerate in the second half of this year to an annual rate of about 3 percent to 4 percent and said businesses were poised to hire. "We are lean and mean, our balance sheets are in great shape in America," he said. "There is a lot of liquidity out there. I am eager to see the trigger -- I don't know what it is -- for that money to be spent putting Americans back to work." (Reporting by Glenn Somerville, editing by Jeffrey Benkoe)
    Category: MBS, FED, ECON
    Share:   
  • 6/7/11
    Fed-Speak: Too Soon to Consider QEIII; Rosengren
    These comments from non-FOMC monetary policy voter Eric Rosengren call attention to what is becoming a more vocal debate in the marketplace. Will we see another round of Quantitative Easing from the Federal Reserve? Fed Chairman Ben Bernanke speaks this afternoon and although the topic of his speech is TBA, the market is expecting him to share a dovish tone, which is supportive of lower interest rates. However we wouldn't expect him to share too much forward looking guidance as the Fed has set a high-bar on implementing another Quantitative Easing program. Ben should acknowledge a slower than anticipated economic recovery but he will probably reiterate that the Fed "will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery". (Reuters) - U.S. economic growth has been weaker than economists had expected, but it is still too soon for the Federal Reserve to consider additional bond purchases, Boston Fed President Eric Rosengren said on Monday. Rosengren also did not rule out a third round of quantitative easing of monetary policy, or QE3. "I think it's too soon to make that determination," Rosengren told CNBC Television. "It's too soon to determine what the next steps for monetary policy are." Rosengren, considered one of the more dovish members of the Federal Open Market Committee, did suggest the expansion's softness might delay the day when the Fed eventually begins to withdraw stimulus. "The slowdown does change when you think the timing would be for when an exit strategy would be appropriate. Rosengren is not a voter on the FOMC this year. (Reporting by Pedro Nicolaci da Costa, Editing by Gary Crosse)
    Category: MBS, FED, ECON
    Share:   
  • 6/7/11
    ALERT: Loan Pricing Worse as Stocks Bounce from Lows
    Rate sheets are set weaken once again as benchmark Treasuries get off to another slow start and MBS prices follow the leader into lower price territory. A bounce in stock futures is leading money out of bonds this morning. The 10-year Treasury note is 10/32 lower in price and 3.5bps higher in yield at 3.031%% and the Fannie Mae 30-year 4.0 MBS coupon is -7/32 at 100-27. This behavior is similar to what we witnessed yesterday morning before a modest reversal played out in the afternoon hours as declining stock indexes sparked a reallocation of funds back into risk-free assets. Stock futures are off those afternoon lows after more than five weeks of declines. S&P 500 futures are 6 points higher at 1,291 and Dow futures are 68 points up at 12,126. The federal fundraising process gets underway with $32-billion 3-year notes, results will be announced shortly after 1pm eastern. Although we'd expect Wednesday's $21-billion 10-year note issue to carry more influence over mortgage rates, we can't overlook any auction. If MBS and ultimately, rate sheets, hope to revisit record setting levels, strong demand for all U.S. debt must be exhibited by bond investors. The day is unlikely to end with little fanfare as Fed Chairman Ben Bernanke will take center-stage at the International Monetary Conference in Atlanta at 3:45pm eastern. Because his topic of discussion is "to be announced", we'll be paying close attention for any updates Bernanke shares on monetary policy (QEIII) and the FOMC's economic outlook. While this event takes place in after hours trading, the Fed Chairman always carries enough clout to move the markets.
    Category: MBS, FED, alert
    Share:   
  • 6/7/11
    HUD Ready to Grant Neighorhood Rehab Funding
    WASHINGTON – The U.S. Department of Housing and Urban Development announced today that $3.6 million in Choice Neighborhoods Planning Grants will be awarded in fiscal year 2011 to assist in the transformation, rehabilitation and preservation of public housing and privately owned HUD-assisted housing. “Our Choice Neighborhoods Initiative rewards communities that use innovative tools to tackle concentrated poverty holistically,” said HUD Secretary Shaun Donovan. “The initiative expands on the bipartisan success of the HOPE VI program by recognizing that we must link affordable housing with quality education, public transportation, good jobs and safe streets. President Obama has said that there is no greater economic policy than one that invests in our children’s future and helps America out-educate the world. But that's not possible if we leave a whole generation of children behind in our poorest neighborhoods.” As part of HUD’s overall plan to revitalize areas of concentrated poverty, the Choice Neighborhoods Planning Grants are intended to help transform distressed public and assisted housing into sustainable, mixed-income housing that connects to key services, such as education and transportation, and supports positive outcomes for the neighborhood’s families. Eligible applicants are public housing authorities, local governments, nonprofit organizations, and for-profit developers that apply jointly with a public entity. Applicants must demonstrate their plan to revitalize the neighborhood through public-private partnerships that seek to develop high-quality public schools and early learning programs, public transportation, and improved access to jobs and well-functioning services. Applicants have until August 8, 2011 to apply for the Choice Neighborhoods Planning Grants. HUD anticipates awarding approximately 12 grants with a maximum award of $300,000 each.
    Category: INDUSTRY
    Share:   
  • 6/7/11
    Goldman Offloads Servicing Business
    (Reuters) - Goldman Sachs Group Inc agreed to sell its beleaguered mortgage servicing unit for just over $600 million, putting an end to its ill-timed 3-1/2 year foray into a controversial corner of the U.S. housing market. Ocwen Financial Corp said on Monday it would buy Goldman's Litton Loan Servicing unit for $263.7 million in cash. Ocwen also agreed to pay off $337.4 million in Litton debt to Goldman, helped by a new $575 million loan from Barclays , which advised Ocwen on the deal. The deal gives Ocwen a mortgage servicing portfolio totaling $41.2 billion, mostly subprime mortgages made to U.S. borrowers with less than stellar credit. Mortgage service firms collect payments and handle foreclosures for mortgage owners or investors who hold securities backed by pools of mortgages. In a statement, Goldman said the sale price "does not reflect certain assets that Goldman Sachs will retain." The bank declined to specify those assets. Goldman bought Litton in 2007 for about $430 million, hoping to glean more information about the housing market to aid its mortgage-bond trading business. Shortly after the deal closed, the U.S. subprime housing market deteriorated to a far greater degree than most experts had expected. High levels of delinquencies and foreclosures have cut into profits of many servicing businesses. In recent months, sloppy foreclosure practices also have attracted growing regulatory attention -- and reams of bad publicity. (Reporting by Lauren Tara LaCapra, Knut Engelmann and Paritosh Bansal; editing by John Wallace, Tim Dobbyn and Carol Bishopric)
    Category: INDUSTRY
    Share:   
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  • 6/7/11
    The day ahead is highlighted by two events: a $21bn 10yr note auction at 1pm and the release of the Beige Book at 2pm eastern. Our current view supports strong auction results tomorrow but we would expect interest rates to display weakness early in the day as traders look to build-up a concession against expensive Treasury prices. In terms of economic data, Reuters writes...Economists expect to see the weakest Beige Book report since the beginning of the year, and will be watching for signs of a crisis of confidence, which the economy can ill afford when payroll growth has fallen below the rate necessary to chip away at unemployment. This latest collection of anecdotes from the Fed is expected to underscore that a slowdown is making itself apparent across a broad range of indicators, with the labor market suddenly turning softer than expected and manufacturing growth seeming to flatten. While the slowdown itself is certainly no surprise, the report could offer a clue as to how long the weakness will last. Some economists believe the recovery may be entering an inflection point of sorts, with the ISM non-manufacturing index implying stronger growth than the ISM manufacturing index for the first time since the recovery began. Also on the Fed calendar, Federal Reserve Bank of Kansas City President Thomas Hoenig speaks before a luncheon of business and community leaders. DAY AHEAD VIDEO: http://www.reuters.com/video/2011/06/07/the-day-ahead-june?videoId=211732309&videoChannel=5
    Category: MBS, FED, ECON
    Share:   
  • 6/7/11
    Just as they did yesterday afternoon, "rate sheet influential...
    MBS Updates are a service provided to MBS Live! subscribers only.
    Learn More | Start a Free Trial | View MBS Prices
    Category: MBS, alert
    Share:   
  • 6/7/11
    (Reuters) - Federal Reserve Chairman Ben Bernanke on Tuesday acknowledged a slowdown in the economy but offered no suggestion the central bank is considering any further monetary stimulus to support growth. He also issued a stern warning to lawmakers in Washington who are considering aggressive budget cuts, saying they have the potential to derail the economic recovery. A recent spate of weak economic data, capped by a report on Friday showing U.S. employers expanded payrolls by a meager 54,000 workers last month, has renewed investor speculation that the economy could need more help from the Fed. "U.S. economic growth so far this year looks to have been somewhat slower than expected," Bernanke said in remarks prepared for delivery at a banking conference in Atlanta. "A number of indicators also suggest some loss in momentum in labor markets in recent weeks," he added. However, Bernanke argued the latest bout of weakness would likely not last very long, and should give way to stronger growth in the second half of the year. Citing a recent spike in U.S. inflation, Bernanke said it was a worrisome trend but, like the economic softness, he predicted the trend would be transitory. He argued that weak growth in wages along with stable inflation expectations gave him comfort that the economy was under no immediate threat of an upward price spiral. On the budget, Bernanke repeated his call for a long-term plan for a sustainable fiscal path, but warned politicians against massive short-term reductions in spending. "A sharp fiscal consolidation focused on the very near term could be self-defeating if it were to undercut the still-fragile recovery," Bernanke said.
    Category: MBS, FED, ECON
    Share:   
  • 6/7/11
    Following a strong 3yr Treasury note auction, trading...
    MBS Updates are a service provided to MBS Live! subscribers only.
    Learn More | Start a Free Trial | View MBS Prices
    Category: MBS, alert
    Share:   
  • 6/7/11
    Treasury just auctioned $32-billion 3-year notes. Demand was strong for this issue, even at expensive prices. That is illustrated via an above-average "bid to cover" ratio, which came at 3.28 bids submitted for every 1 accepted by Treasury. This maintains strong demand in the last four 3yr note auctions. The high-yield produced by bidding in the actual auction was also 0.8 basis points below the 1pm "When Issued" yield . This is another sign of a strong buyer appetite. Dealers were the big winner in this one with a 55% award or $17.7bn of the $32bn offered. That is well-above average for primary dealers. Indirect accounts gave a little extra support as well with a 36% take-down. Directs on the other hand showed little motivation on all fronts. Based on the aggressive price bidding, even at expensive levels, it appears that primary dealers, the major supportive influence in today's auction, we're short 3-yr note inventory and needed to cover their "short positions" (or close flatteners/curve spread trades). We'd expect similar behavior in tomorrow's 10yr note auction. "Short covering" is when a bearish trader closes a position that was opened with the intention of capitalizing on lower prices/higher yields (or a flattener position). The term "short" describes the trader's directional bias. "Covering" simply means closing the position was closed.
    Category: MBS, FED
    Share:   
  • 6/7/11
    Dennis Lockhart, president of the Atlanta Federal Reserve Bank, today spoke in support of an explicit inflation target. Lockhart said low and stable inflation is one of the underlying fundamentals that will shape the country's economic performance over the coming quarters and years. The concept of core inflation is part of the FOMC's policy discussion, not because it is an objective of monetary policy but because it is often an informative statistic. However, the objective of policy in the end has to be defined in terms real people experience—that is overall, or headline, inflation. This would include cost of living expenses such as food and energy. According to Lockhart, he would not hesitate to support an exit from the FOMC's current policy stance if he believed the headline inflation number of the past six months was indicative of the underlying trend inflation rate. He doesn't believe this to be the case. He said he is wary of tightening monetary policy in the face of quite ambiguous economic circumstances unless doing so is absolutely necessary to meet the FOMC's price stability mandate. The language the FOMC uses to explain its inflation forecasts can, at times, get in the way of effectively communicating its ultimate inflation objective. One way to deal with this tension (an approach employed by many central banks around the world) is to set an explicit numerical objective for inflation, also known as an inflation target. He supports the FOMC setting such a target. According to Lockhart, the specifics of an inflation target would need to be worked out by FOMC participants. But a few principles for an effective inflation target would be stating it in terms of some measure of overall, or headline, inflation and making it achievable over a realistic time frame. An appropriately constructed inflation target would not be in conflict with the FOMC's mandate to support employment.
    Category: MBS, FED, ECON
    Share:   
  • 6/7/11
    "Rate sheet influential" MBS prices are revisiting...
    MBS Updates are a service provided to MBS Live! subscribers only.
    Learn More | Start a Free Trial | View MBS Prices
    Category: MBS
    Share:   
  • 6/7/11
    Richard Fisher is a Fed policy voter. His opinion matters more than a non-FOMC voter. Right now he doesn't support further Quantitative Easing. He is a "hawk". Instead he feels there is plenty of liquidity in the financial system and believes it is time to focus on national budget issues. (Reuters) - Dallas Federal Reserve President Richard Fisher said on Tuesday there was ample liquidity in the U.S. financial system and no need for the U.S. central bank to continue its extremely easy monetary policy. Interviewed on CNBC television, Fisher said U.S. businesses' balance sheets were in good shape and companies were awaiting clearer signs about how the economy will develop before they kick up the pace of hiring. "This is going to be a very slow process, and right now we need to get the fiscal side" lined up, Fisher said. Fisher, a voting member of the Fed's rate-setting Federal Open Market Committee, already is on record saying the central bank should not continue a bond-buying program. Its $600 billion second round of quantitative easing, known as QE2, ends this month. "What would more liquidity do? It's not being used. It's sitting on the sidelines. The gas tanks are full," he said. Fisher said he expects economic growth to accelerate in the second half of this year to an annual rate of about 3 percent to 4 percent and said businesses were poised to hire. "We are lean and mean, our balance sheets are in great shape in America," he said. "There is a lot of liquidity out there. I am eager to see the trigger -- I don't know what it is -- for that money to be spent putting Americans back to work." (Reporting by Glenn Somerville, editing by Jeffrey Benkoe)
    Category: MBS, FED, ECON
    Share:   
  • 6/7/11
    These comments from non-FOMC monetary policy voter Eric Rosengren call attention to what is becoming a more vocal debate in the marketplace. Will we see another round of Quantitative Easing from the Federal Reserve? Fed Chairman Ben Bernanke speaks this afternoon and although the topic of his speech is TBA, the market is expecting him to share a dovish tone, which is supportive of lower interest rates. However we wouldn't expect him to share too much forward looking guidance as the Fed has set a high-bar on implementing another Quantitative Easing program. Ben should acknowledge a slower than anticipated economic recovery but he will probably reiterate that the Fed "will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery". (Reuters) - U.S. economic growth has been weaker than economists had expected, but it is still too soon for the Federal Reserve to consider additional bond purchases, Boston Fed President Eric Rosengren said on Monday. Rosengren also did not rule out a third round of quantitative easing of monetary policy, or QE3. "I think it's too soon to make that determination," Rosengren told CNBC Television. "It's too soon to determine what the next steps for monetary policy are." Rosengren, considered one of the more dovish members of the Federal Open Market Committee, did suggest the expansion's softness might delay the day when the Fed eventually begins to withdraw stimulus. "The slowdown does change when you think the timing would be for when an exit strategy would be appropriate. Rosengren is not a voter on the FOMC this year. (Reporting by Pedro Nicolaci da Costa, Editing by Gary Crosse)
    Category: MBS, FED, ECON
    Share:   
  • 6/7/11
    Rate sheets are set weaken once again as benchmark Treasuries get off to another slow start and MBS prices follow the leader into lower price territory. A bounce in stock futures is leading money out of bonds this morning. The 10-year Treasury note is 10/32 lower in price and 3.5bps higher in yield at 3.031%% and the Fannie Mae 30-year 4.0 MBS coupon is -7/32 at 100-27. This behavior is similar to what we witnessed yesterday morning before a modest reversal played out in the afternoon hours as declining stock indexes sparked a reallocation of funds back into risk-free assets. Stock futures are off those afternoon lows after more than five weeks of declines. S&P 500 futures are 6 points higher at 1,291 and Dow futures are 68 points up at 12,126. The federal fundraising process gets underway with $32-billion 3-year notes, results will be announced shortly after 1pm eastern. Although we'd expect Wednesday's $21-billion 10-year note issue to carry more influence over mortgage rates, we can't overlook any auction. If MBS and ultimately, rate sheets, hope to revisit record setting levels, strong demand for all U.S. debt must be exhibited by bond investors. The day is unlikely to end with little fanfare as Fed Chairman Ben Bernanke will take center-stage at the International Monetary Conference in Atlanta at 3:45pm eastern. Because his topic of discussion is "to be announced", we'll be paying close attention for any updates Bernanke shares on monetary policy (QEIII) and the FOMC's economic outlook. While this event takes place in after hours trading, the Fed Chairman always carries enough clout to move the markets.
    Category: MBS, FED, alert
    Share:   
  • 6/7/11
    The Day Ahead: $21bn 10s and Beige Book
    The day ahead is highlighted by two events: a $21bn 10yr note auction at 1pm and the release of the Beige Book at 2pm eastern. Our current view supports strong auction results tomorrow but we would expect interest rates to display weakness early in the day as traders look to build-up a concession against expensive Treasury prices. In terms of economic data, Reuters writes...Economists expect to see the weakest Beige Book report since the beginning of the year, and will be watching for signs of a crisis of confidence, which the economy can ill afford when payroll growth has fallen below the rate necessary to chip away at unemployment. This latest collection of anecdotes from the Fed is expected to underscore that a slowdown is making itself apparent across a broad range of indicators, with the labor market suddenly turning softer than expected and manufacturing growth seeming to flatten. While the slowdown itself is certainly no surprise, the report could offer a clue as to how long the weakness will last. Some economists believe the recovery may be entering an inflection point of sorts, with the ISM non-manufacturing index implying stronger growth than the ISM manufacturing index for the first time since the recovery began. Also on the Fed calendar, Federal Reserve Bank of Kansas City President Thomas Hoenig speaks before a luncheon of business and community leaders. DAY AHEAD VIDEO: http://www.reuters.com/video/2011/06/07/the-day-ahead-june?videoId=211732309&videoChannel=5
    Category: MBS, FED, ECON
    Share:   
  • 6/7/11
    Bernanke Glum on Growth; No Hint of More Stimulus
    (Reuters) - Federal Reserve Chairman Ben Bernanke on Tuesday acknowledged a slowdown in the economy but offered no suggestion the central bank is considering any further monetary stimulus to support growth. He also issued a stern warning to lawmakers in Washington who are considering aggressive budget cuts, saying they have the potential to derail the economic recovery. A recent spate of weak economic data, capped by a report on Friday showing U.S. employers expanded payrolls by a meager 54,000 workers last month, has renewed investor speculation that the economy could need more help from the Fed. "U.S. economic growth so far this year looks to have been somewhat slower than expected," Bernanke said in remarks prepared for delivery at a banking conference in Atlanta. "A number of indicators also suggest some loss in momentum in labor markets in recent weeks," he added. However, Bernanke argued the latest bout of weakness would likely not last very long, and should give way to stronger growth in the second half of the year. Citing a recent spike in U.S. inflation, Bernanke said it was a worrisome trend but, like the economic softness, he predicted the trend would be transitory. He argued that weak growth in wages along with stable inflation expectations gave him comfort that the economy was under no immediate threat of an upward price spiral. On the budget, Bernanke repeated his call for a long-term plan for a sustainable fiscal path, but warned politicians against massive short-term reductions in spending. "A sharp fiscal consolidation focused on the very near term could be self-defeating if it were to undercut the still-fragile recovery," Bernanke said.
    Category: MBS, FED, ECON
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  • 6/7/11
    Fed-Speak: Cost of Living Expenses & Inflation Targeting; Lockhart
    Dennis Lockhart, president of the Atlanta Federal Reserve Bank, today spoke in support of an explicit inflation target. Lockhart said low and stable inflation is one of the underlying fundamentals that will shape the country's economic performance over the coming quarters and years. The concept of core inflation is part of the FOMC's policy discussion, not because it is an objective of monetary policy but because it is often an informative statistic. However, the objective of policy in the end has to be defined in terms real people experience—that is overall, or headline, inflation. This would include cost of living expenses such as food and energy. According to Lockhart, he would not hesitate to support an exit from the FOMC's current policy stance if he believed the headline inflation number of the past six months was indicative of the underlying trend inflation rate. He doesn't believe this to be the case. He said he is wary of tightening monetary policy in the face of quite ambiguous economic circumstances unless doing so is absolutely necessary to meet the FOMC's price stability mandate. The language the FOMC uses to explain its inflation forecasts can, at times, get in the way of effectively communicating its ultimate inflation objective. One way to deal with this tension (an approach employed by many central banks around the world) is to set an explicit numerical objective for inflation, also known as an inflation target. He supports the FOMC setting such a target. According to Lockhart, the specifics of an inflation target would need to be worked out by FOMC participants. But a few principles for an effective inflation target would be stating it in terms of some measure of overall, or headline, inflation and making it achievable over a realistic time frame. An appropriately constructed inflation target would not be in conflict with the FOMC's mandate to support employment.
    Category: MBS, FED, ECON
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  • 6/7/11
    Fed-Speak: Fisher Wants to Focus on Fiscal Issues
    Richard Fisher is a Fed policy voter. His opinion matters more than a non-FOMC voter. Right now he doesn't support further Quantitative Easing. He is a "hawk". Instead he feels there is plenty of liquidity in the financial system and believes it is time to focus on national budget issues. (Reuters) - Dallas Federal Reserve President Richard Fisher said on Tuesday there was ample liquidity in the U.S. financial system and no need for the U.S. central bank to continue its extremely easy monetary policy. Interviewed on CNBC television, Fisher said U.S. businesses' balance sheets were in good shape and companies were awaiting clearer signs about how the economy will develop before they kick up the pace of hiring. "This is going to be a very slow process, and right now we need to get the fiscal side" lined up, Fisher said. Fisher, a voting member of the Fed's rate-setting Federal Open Market Committee, already is on record saying the central bank should not continue a bond-buying program. Its $600 billion second round of quantitative easing, known as QE2, ends this month. "What would more liquidity do? It's not being used. It's sitting on the sidelines. The gas tanks are full," he said. Fisher said he expects economic growth to accelerate in the second half of this year to an annual rate of about 3 percent to 4 percent and said businesses were poised to hire. "We are lean and mean, our balance sheets are in great shape in America," he said. "There is a lot of liquidity out there. I am eager to see the trigger -- I don't know what it is -- for that money to be spent putting Americans back to work." (Reporting by Glenn Somerville, editing by Jeffrey Benkoe)
    Category: MBS, FED, ECON
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  • 6/7/11
    Fed-Speak: Too Soon to Consider QEIII; Rosengren
    These comments from non-FOMC monetary policy voter Eric Rosengren call attention to what is becoming a more vocal debate in the marketplace. Will we see another round of Quantitative Easing from the Federal Reserve? Fed Chairman Ben Bernanke speaks this afternoon and although the topic of his speech is TBA, the market is expecting him to share a dovish tone, which is supportive of lower interest rates. However we wouldn't expect him to share too much forward looking guidance as the Fed has set a high-bar on implementing another Quantitative Easing program. Ben should acknowledge a slower than anticipated economic recovery but he will probably reiterate that the Fed "will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery". (Reuters) - U.S. economic growth has been weaker than economists had expected, but it is still too soon for the Federal Reserve to consider additional bond purchases, Boston Fed President Eric Rosengren said on Monday. Rosengren also did not rule out a third round of quantitative easing of monetary policy, or QE3. "I think it's too soon to make that determination," Rosengren told CNBC Television. "It's too soon to determine what the next steps for monetary policy are." Rosengren, considered one of the more dovish members of the Federal Open Market Committee, did suggest the expansion's softness might delay the day when the Fed eventually begins to withdraw stimulus. "The slowdown does change when you think the timing would be for when an exit strategy would be appropriate. Rosengren is not a voter on the FOMC this year. (Reporting by Pedro Nicolaci da Costa, Editing by Gary Crosse)
    Category: MBS, FED, ECON
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  • 6/7/11
    The Day Ahead: $21bn 10s and Beige Book
    The day ahead is highlighted by two events: a $21bn 10yr note auction at 1pm and the release of the Beige Book at 2pm eastern. Our current view supports strong auction results tomorrow but we would expect interest rates to display weakness early in the day as traders look to build-up a concession against expensive Treasury prices. In terms of economic data, Reuters writes...Economists expect to see the weakest Beige Book report since the beginning of the year, and will be watching for signs of a crisis of confidence, which the economy can ill afford when payroll growth has fallen below the rate necessary to chip away at unemployment. This latest collection of anecdotes from the Fed is expected to underscore that a slowdown is making itself apparent across a broad range of indicators, with the labor market suddenly turning softer than expected and manufacturing growth seeming to flatten. While the slowdown itself is certainly no surprise, the report could offer a clue as to how long the weakness will last. Some economists believe the recovery may be entering an inflection point of sorts, with the ISM non-manufacturing index implying stronger growth than the ISM manufacturing index for the first time since the recovery began. Also on the Fed calendar, Federal Reserve Bank of Kansas City President Thomas Hoenig speaks before a luncheon of business and community leaders. DAY AHEAD VIDEO: http://www.reuters.com/video/2011/06/07/the-day-ahead-june?videoId=211732309&videoChannel=5
    Category: MBS, FED, ECON
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  • 6/7/11
    Bernanke Glum on Growth; No Hint of More Stimulus
    (Reuters) - Federal Reserve Chairman Ben Bernanke on Tuesday acknowledged a slowdown in the economy but offered no suggestion the central bank is considering any further monetary stimulus to support growth. He also issued a stern warning to lawmakers in Washington who are considering aggressive budget cuts, saying they have the potential to derail the economic recovery. A recent spate of weak economic data, capped by a report on Friday showing U.S. employers expanded payrolls by a meager 54,000 workers last month, has renewed investor speculation that the economy could need more help from the Fed. "U.S. economic growth so far this year looks to have been somewhat slower than expected," Bernanke said in remarks prepared for delivery at a banking conference in Atlanta. "A number of indicators also suggest some loss in momentum in labor markets in recent weeks," he added. However, Bernanke argued the latest bout of weakness would likely not last very long, and should give way to stronger growth in the second half of the year. Citing a recent spike in U.S. inflation, Bernanke said it was a worrisome trend but, like the economic softness, he predicted the trend would be transitory. He argued that weak growth in wages along with stable inflation expectations gave him comfort that the economy was under no immediate threat of an upward price spiral. On the budget, Bernanke repeated his call for a long-term plan for a sustainable fiscal path, but warned politicians against massive short-term reductions in spending. "A sharp fiscal consolidation focused on the very near term could be self-defeating if it were to undercut the still-fragile recovery," Bernanke said.
    Category: MBS, FED, ECON
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  • 6/7/11
    Auction Results: Aggressive Demand for 3s
    Treasury just auctioned $32-billion 3-year notes. Demand was strong for this issue, even at expensive prices. That is illustrated via an above-average "bid to cover" ratio, which came at 3.28 bids submitted for every 1 accepted by Treasury. This maintains strong demand in the last four 3yr note auctions. The high-yield produced by bidding in the actual auction was also 0.8 basis points below the 1pm "When Issued" yield . This is another sign of a strong buyer appetite. Dealers were the big winner in this one with a 55% award or $17.7bn of the $32bn offered. That is well-above average for primary dealers. Indirect accounts gave a little extra support as well with a 36% take-down. Directs on the other hand showed little motivation on all fronts. Based on the aggressive price bidding, even at expensive levels, it appears that primary dealers, the major supportive influence in today's auction, we're short 3-yr note inventory and needed to cover their "short positions" (or close flatteners/curve spread trades). We'd expect similar behavior in tomorrow's 10yr note auction. "Short covering" is when a bearish trader closes a position that was opened with the intention of capitalizing on lower prices/higher yields (or a flattener position). The term "short" describes the trader's directional bias. "Covering" simply means closing the position was closed.
    Category: MBS, FED
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  • 6/7/11
    Fed-Speak: Cost of Living Expenses & Inflation Targeting; Lockhart
    Dennis Lockhart, president of the Atlanta Federal Reserve Bank, today spoke in support of an explicit inflation target. Lockhart said low and stable inflation is one of the underlying fundamentals that will shape the country's economic performance over the coming quarters and years. The concept of core inflation is part of the FOMC's policy discussion, not because it is an objective of monetary policy but because it is often an informative statistic. However, the objective of policy in the end has to be defined in terms real people experience—that is overall, or headline, inflation. This would include cost of living expenses such as food and energy. According to Lockhart, he would not hesitate to support an exit from the FOMC's current policy stance if he believed the headline inflation number of the past six months was indicative of the underlying trend inflation rate. He doesn't believe this to be the case. He said he is wary of tightening monetary policy in the face of quite ambiguous economic circumstances unless doing so is absolutely necessary to meet the FOMC's price stability mandate. The language the FOMC uses to explain its inflation forecasts can, at times, get in the way of effectively communicating its ultimate inflation objective. One way to deal with this tension (an approach employed by many central banks around the world) is to set an explicit numerical objective for inflation, also known as an inflation target. He supports the FOMC setting such a target. According to Lockhart, the specifics of an inflation target would need to be worked out by FOMC participants. But a few principles for an effective inflation target would be stating it in terms of some measure of overall, or headline, inflation and making it achievable over a realistic time frame. An appropriately constructed inflation target would not be in conflict with the FOMC's mandate to support employment.
    Category: MBS, FED, ECON
    Share:   
  • 6/7/11
    Fed-Speak: Fisher Wants to Focus on Fiscal Issues
    Richard Fisher is a Fed policy voter. His opinion matters more than a non-FOMC voter. Right now he doesn't support further Quantitative Easing. He is a "hawk". Instead he feels there is plenty of liquidity in the financial system and believes it is time to focus on national budget issues. (Reuters) - Dallas Federal Reserve President Richard Fisher said on Tuesday there was ample liquidity in the U.S. financial system and no need for the U.S. central bank to continue its extremely easy monetary policy. Interviewed on CNBC television, Fisher said U.S. businesses' balance sheets were in good shape and companies were awaiting clearer signs about how the economy will develop before they kick up the pace of hiring. "This is going to be a very slow process, and right now we need to get the fiscal side" lined up, Fisher said. Fisher, a voting member of the Fed's rate-setting Federal Open Market Committee, already is on record saying the central bank should not continue a bond-buying program. Its $600 billion second round of quantitative easing, known as QE2, ends this month. "What would more liquidity do? It's not being used. It's sitting on the sidelines. The gas tanks are full," he said. Fisher said he expects economic growth to accelerate in the second half of this year to an annual rate of about 3 percent to 4 percent and said businesses were poised to hire. "We are lean and mean, our balance sheets are in great shape in America," he said. "There is a lot of liquidity out there. I am eager to see the trigger -- I don't know what it is -- for that money to be spent putting Americans back to work." (Reporting by Glenn Somerville, editing by Jeffrey Benkoe)
    Category: MBS, FED, ECON
    Share:   
  • 6/7/11
    Fed-Speak: Too Soon to Consider QEIII; Rosengren
    These comments from non-FOMC monetary policy voter Eric Rosengren call attention to what is becoming a more vocal debate in the marketplace. Will we see another round of Quantitative Easing from the Federal Reserve? Fed Chairman Ben Bernanke speaks this afternoon and although the topic of his speech is TBA, the market is expecting him to share a dovish tone, which is supportive of lower interest rates. However we wouldn't expect him to share too much forward looking guidance as the Fed has set a high-bar on implementing another Quantitative Easing program. Ben should acknowledge a slower than anticipated economic recovery but he will probably reiterate that the Fed "will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery". (Reuters) - U.S. economic growth has been weaker than economists had expected, but it is still too soon for the Federal Reserve to consider additional bond purchases, Boston Fed President Eric Rosengren said on Monday. Rosengren also did not rule out a third round of quantitative easing of monetary policy, or QE3. "I think it's too soon to make that determination," Rosengren told CNBC Television. "It's too soon to determine what the next steps for monetary policy are." Rosengren, considered one of the more dovish members of the Federal Open Market Committee, did suggest the expansion's softness might delay the day when the Fed eventually begins to withdraw stimulus. "The slowdown does change when you think the timing would be for when an exit strategy would be appropriate. Rosengren is not a voter on the FOMC this year. (Reporting by Pedro Nicolaci da Costa, Editing by Gary Crosse)
    Category: MBS, FED, ECON
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  • 6/7/11
    Loan Pricing Worse as Stocks Bounce from Lows
    Rate sheets are set weaken once again as benchmark Treasuries get off to another slow start and MBS prices follow the leader into lower price territory. A bounce in stock futures is leading money out of bonds this morning. The 10-year Treasury note is 10/32 lower in price and 3.5bps higher in yield at 3.031%% and the Fannie Mae 30-year 4.0 MBS coupon is -7/32 at 100-27. This behavior is similar to what we witnessed yesterday morning before a modest reversal played out in the afternoon hours as declining stock indexes sparked a reallocation of funds back into risk-free assets. Stock futures are off those afternoon lows after more than five weeks of declines. S&P 500 futures are 6 points higher at 1,291 and Dow futures are 68 points up at 12,126. The federal fundraising process gets underway with $32-billion 3-year notes, results will be announced shortly after 1pm eastern. Although we'd expect Wednesday's $21-billion 10-year note issue to carry more influence over mortgage rates, we can't overlook any auction. If MBS and ultimately, rate sheets, hope to revisit record setting levels, strong demand for all U.S. debt must be exhibited by bond investors. The day is unlikely to end with little fanfare as Fed Chairman Ben Bernanke will take center-stage at the International Monetary Conference in Atlanta at 3:45pm eastern. Because his topic of discussion is "to be announced", we'll be paying close attention for any updates Bernanke shares on monetary policy (QEIII) and the FOMC's economic outlook. While this event takes place in after hours trading, the Fed Chairman always carries enough clout to move the markets.
    Category: MBS, FED, alert
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