MBS Live: Improved After Data, Holding Pattern Until Auction

Things have been fairly uneventful following the morning data.  MBS and Treasuries both rallied to the stronger end of their two day ranges, but had second thoughts before pressing on into stronger levels than yesterday.  We wouldn't be surprised to see this sort of sideways, slightly indecisive, and narrow range trade persist heading into the 1pm 7yr Note Auction, and would even go so far as to say we wouldn't rule out some additional weakness by way of building in a bit of concession for the new supply of debt.  Things are stable and sideways for now though, even if "sideways" refers to a somewhat choppy range (2.15-2.17 in 10's) and 102-26 to 102-30 in Fannie 3.5 MBS.

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FNMA 3.5
102-27 : +0-06
FNMA 4.0
104-31 : +0-05
FNMA 4.5
106-16 : +0-05
FNMA 5.0
108-04 : +0-02
GNMA 3.5
104-11 : +0-06
GNMA 4.0
107-13 : +0-05
GNMA 4.5
108-29 : +0-03
GNMA 5.0
110-17 : -0-01
FHLMC 3.5
102-20 : +0-07
FHLMC 4.0
104-21 : +0-05
FHLMC 4.5
106-05 : +0-04
FHLMC 5.0
107-25 : +0-01
Pricing as of 11:08 AM EST
Morning Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBS Live Dashboard.

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10:08AM  :  PMMS: 30-Year Fixed-Rate Mortgage Dips Back Below 4.00 Percent
Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing mortgage rates, fixed and adjustable, moving lower on weaker housing economic indicators as the average 30-year fixed-rate mortgage slid just below 4.00 percent for the week.
  • 30-year fixed-rate mortgage (FRM) averaged 3.99 percent with an average 0.7 point for the week ending March 29, 2012, down from last week when it averaged 4.08 percent. Last year at this time, the 30-year FRM averaged 4.86 percent.
  • 15-year FRM this week averaged 3.23 percent with an average 0.8 point, down from last week when it averaged 3.30 percent. A year ago at this time, the 15-year FRM averaged 4.09 percent.
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.90 percent this week, with an average 0.8 point, down from last week when it averaged 2.96 percent. A year ago, the 5-year ARM averaged 3.70 percent.
  • 1-year Treasury-indexed ARM averaged 2.78 percent this week with an average 0.6 point, down from last week when it averaged 2.84 percent. At this time last year, the 1-year ARM averaged 3.26 percent.
Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following links for Regional and National Mortgage Rate Details and Definitions. Borrowers may still pay closing costs which are not included in the survey.
9:01AM  :  ALERT: Bond Markets Flat Overnight, But Much Improved Following Data
Treasuries are close to yesterday's best levels and MBS are about half-way there following this morning's weaker-than-expected economic data. Additionally, the overnight session offered some small impetus toward lower yields as European headlines, data, and auctions (Italy) combined to generally economically bearish effect. S&P warns of the need for another Greek debt restructuring. Pressure on Portugal and or Spain is mounting to fill the role of the "next Greece," the OECD forecasts for growth in Germany fell from 1.5 pct to 0.1 pct, and EU's Industrial and Business Climates were worse than expected.

All the European news helped bond markets walk in the door slightly improved, but domestic data took things to the next level. Given that Q4 Final GDP was in lien with expectations across the board, the door was open for a weaker than expected Jobless Claims to move markets. The most notable part of claims, however, was the big revision to the previous week's reading, from 348k to 364k. The headline rose to 359k vs a 350k consensus.

After trading around 102-22 before the data, MBS rose to grind around 102-26 and look like they intent to break higher if Treasuries make a similarly bullish move. 10yr yields started the day in the mid 2.19's and are down to 2.164 currently, close to yesterday's low of 2.1605. The extent of the bullishness could be limited by a 7yr auction yet to come at 1pm today. After that, a certain measure of pent up trading sentiment will be released, both from yesterday's 5yr auction as well as this morning's data. Traders merely have to wait for more letters to be flipped over before solving the puzzle.
8:41AM  :  ECON: GDP Rises 3.0 Percent As Expected
* GDP +3.0 pct as expected
* PCE Price Index, consumer spending as expected
* Business Investment +5.2 pct, previously +2.8 pct

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 3.0 percent in the fourth quarter of 2011 (that is, from the third quarter to the fourth quarter), according to the "third" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 1.8 percent.

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

The acceleration in real GDP in the fourth quarter primarily reflected an upturn in private inventory investment and accelerations in PCE and in residential fixed investment that were partly offset by a deceleration in nonresidential fixed investment, a downturn in federal government spending, an acceleration in imports, and a deceleration in exports.

Motor vehicle output added 0.47 percentage point to the fourth-quarter change in real GDP after adding 0.12 percentage point to the third-quarter change. Final sales of computers added 0.12 percentage point to the fourth-quarter change in real GDP after adding 0.22 percentage point to the third-quarter change.
8:36AM  :  ECON: Claims Miss Estimate; BIG Revisions Higher Last Week
*359k vs 350k estimates
*Last week revised up from 348k to 364k

In the week ending March 24, the advance figure for seasonally adjusted initial claims was 359,000, a decrease of 5,000 from the previous week's revised figure of 364,000. The 4-week moving average was 365,000, a decrease of 3,500 from the previous week's revised average of 368,500.

The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending March 17, a decrease of 0.1 percentage point from the prior week's revised rate of 2.7 percent.

The advance number for seasonally adjusted insured unemployment during the week ending March 17 was 3,340,000, a decrease of 41,000 from the preceding week's revised level of 3,381,000. The 4-week moving average was 3,387,750, a decrease of 21,750 from the preceding week's revised average of 3,409,500.
Featured Market Discussion
A recap of the featured comments from the Live Chat on the MBS Live Dashboard.
Jeff Anderson  :  "Gm, all. So looking at claims again, last week had a big revision up, so they actually were up that week, but they got reported as lower prior to the revision and this week due to the revision up from last week they actually went down even though they were higher than expections. So all reports can headline all better , all the time? Just checking. Next cup will be decaf. Go green!"
Jason York  :  "that could be an overlay VB, some lenders would only allow principle balance, but maybe that was only for an investment"
Victor Burek  :  "got an uw telling me cant roll in interest"
Tony Cardinal  :  "but you cannot roll in an fax fees for the payoff"
Tony Cardinal  :  "correct, vb"
Victor Burek  :  "fha streamlines without appraisal...you can still roll in 30 days of interest, correct?"
Matthew Graham  :  "no comment on rate sheets, strictly MBS. but similar conclusions... widening = mbs weaker"
Dan Clifton  :  "MG, for laymen, Widening of spreads means gains are not being passed onto rate sheets while tightening means they are?"
Matthew Graham  :  "looks like tightening has already started... current coupon yields were 89 bps over 10s at 830am and are just under 87 bps over now"
Matthew Graham  :  "MBS have outperformed significantly on the month. There's been a TON of new originations over the past few days, not something you normally see into rallies. MBS spreads have widened back out to about mid-range for March. No notable Fed buying yet, so we could be seeing that and tightening up any time now. 102-30 is a major pivot in terms of price."
Ira Selwin  :  "7 yr is in line with the fannies though"
Paul Carlin  :  "the 10s are smoking, but the fnma and gmna are not seeing the love, "
Matthew Graham  :  "RTRS- U.S. 30-YR FIXED RATE MORTGAGES 3.99 PCT MARCH 29 WK VS 4.08 PCT PRIOR WK-FREDDIE MAC "
Matthew Graham  :  "457k contracts. no report on cash volume yet"
Gus Floropoulos  :  "how's volume in 10's?"
Matthew Graham  :  "at least we'd hope the 7yr auction is the next one."
Matthew Graham  :  "I think 2.1 is the psychological bottom, but technically, things are meatier at 2.136 and 2.09. It's a great day to be floating in the morning with rate sheets coming out before the next big market mover "
Matthew Graham  :  "Mike, no Fed buying yet in MBS, at least not from what I've seen, so maybe that will help things tighten up again"
Brent Borcherding  :  "2.1 to 2.12 the bottom of the range, MG? I'm getting locky."
Mike Drews  :  "someone wake up MBS please"
Matt Hodges  :  "the logical answer is that companies believe that it is an attractive country to grow - assuming lower corporate taxes, but higher personal taxes"
Victor Burek  :  "pretty tough to stimulate when you raise taxes and cut govt spending"
Andy Pada  :  "Is there any example of stimulating economic growth under an austerity plan?"
Andy Pada  :  "I'm wondering how popular the word "austerity" is now?"
Matthew Graham  :  "not a big deal in light of everything hitting preliminary numbers"
Matthew Graham  :  "only notable deviation from expectations I'm seeing in GDP right now is business investment"
Matthew Graham  :  "RTRS - US FINAL Q4 GDP +3.0 PCT (CONSENSUS +3.0 PCT), PREV +3.0 PCT; FINAL SALES +1.1 PCT (CONS +1.1 PCT), PREV +1.1 PCT "
Matthew Graham  :  "GDP, as expected"
Matthew Graham  :  "RTRS- US Q4 CORPORATE PROFITS AFTER TAX +1.1 PCT (CONSENSUS +2.6 PCT), VS Q3 +2.7 PCT (PREV +2.7 PCT) "
Matthew Graham  :  "Corporate Profits missed"
Matthew Graham  :  "RTRS - US CONTINUED CLAIMS FALL TO 3.340 MLN (CON. 3.350 MLN) MARCH 17 WEEK FROM 3.381 MLN PRIOR WEEK (PREV 3.352 MLN) "
Matthew Graham  :  "RTRS- US JOBLESS CLAIMS 4-WK AVG FALLS TO 365,000 MARCH 24 WEEK FROM 368,500 PRIOR WEEK (PREVIOUS 355,000) "
Matthew Graham  :  "wow, big revision"
Victor Burek  :  "big revision higher"
Matthew Graham  :  "RTRS - US JOBLESS CLAIMS FALL TO 359,000 MARCH 24 WEEK (CONSENSUS 350,000) FROM 364,000 PRIOR WEEK (PREVIOUS 348,000) "
jason lewis  :  "Drum roll?"