If the Euro-zone periphery scares you (read: Spanish 10yr yields over 6%), where do you flee to safety? German Bunds? And let's say that at historic lows in the 1.6's German 10yr Bunds are getting a little crowded, then what to do? Don't worry because good old US Treasuries have your back! Fresh off some FOMC-induced gyrations that took yields from 2.07 to 2.40 and back again, 10's are "only" down into the mid 1.9's which is distinctly higher than the last time they served as a sponge to soak up excess Euro-zone flights-to-safety. While this phenomenon isn't the only market mover in play this morning, it has provided a constant, even-keeled bullish presence for longer-maturity Treasuries, as well as MBS. Both are at their highest levels since early March despite this morning's stronger than-expected Retail Sales data. Thanks Europe.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing
is available via MBS Live.
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
MBS, Treasuries Hit Best Levels Since March 7th
Without any immediate motivation by way of headline or economic data, MBS and Treasuries have rallied to their best levels since March 7th. 10yr yields traded briefly in the 1.95's and are currently at 1.96. Fannie 3.5 MBS are up 5 ticks on the day to 103-19 and were as high as 103-22 recently, a price not seen by May coupons since 3/7/11.
The stock lever is fairly well-connected this morning and broad themes of "risk-on vs risk-off" seem to underlie the moderate volume of trading, but there's no clear-cut headline motivation causing one big pop. It's been more of a large, steady wave of price action leading bond markets to better levels.
ECON: Business Inventories Unchanged in February
*Inventories up 0.6 pct vs 0.6 pct consensus
*Sales up 0.7 pct vs Jan +0.4 pct
Sales. The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers’
shipments for February, adjusted for seasonal and trading-day differences but not for price changes, was estimated at
$1,236.7 billion, up 0.7 percent (±0.2%) from January 2012 and up 7.6 percent (±0.4%) from February 2011.
Inventories. Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were
estimated at an end-of-month level of $1,577.8 billion, up 0.6 percent (±0.1%) from January 2012 and up 7.6 percent
(±0.4%) from February 2011.
Inventories/Sales Ratio. The total business inventories/sales ratio based on seasonally adjusted data at the end of
February was 1.28. The February 2011 ratio was 1.28.
ECON: Builder Confidence Slips Three Notches in April
Builder confidence in the market for newly built, single-family homes declined for the first time in seven months this April, sliding three notches to 25 on the National Association of Home Builders/Wells Fargo Housing Market Index, released today. The decline brings the index back to where it was in January, which was the highest level since 2007.
“Although builders in many markets are noting increased interest among potential buyers, consumers are still very hesitant to go forward with a purchase, and our members are realigning their expectations somewhat until they see more actual signed sales contracts,” noted Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla.
“What we’re seeing is essentially a pause in what had been a fairly rapid build-up in builder confidence that started last September,” said NAHB Chief Economist David Crowe. “This is partly because interest expressed by buyers in the past few months has yet to translate into expected sales activity, but is also reflective of the ongoing challenges that are slowing the housing recovery – particularly tight credit conditions for builders and buyers, competition from foreclosures and problems with obtaining accurate appraisals.”
Bond Markets Back to Unchanged Levels Following Data
Bond markets improved slightly in the overnight session from Friday's strong closing levels. 10yr yields were down to 1.97 just after the domestic open as Spain took center stage with its highest 10yr yields of the year (above 6 %). Fannie 3.5 MBS hit 103-18.
The 830am round of data caused a bit of a shake up, generally taking yields higher and prices lower for bond markets, but the damage was minimal as range boundaries proved stronger than any implications from the data. A much weaker read on Manufacturing from the New York Fed helped counterbalance a stronger-than-expected Retail Sales Report.
The Treasury International Capital report, with it's new-and-improved data collection system ostensibly garnering a bit more investor attention (see the link below for more details), showed waning demand for Long-Term US Debt in February. Again bond markets weakened slightly in response to data and again "the range" proved more important than data as 10yr yields bounced just under their last prominent peak from Friday afternoon at 2.00%.
Fannie 3.5 MBS found support at 103-12, also in line with Friday afternoon support and currently trade closer to unchanged on the day at 103-16. 10yr yields are also close to unchanged at 1.986 as bond markets have generally done a fine job of tolerating a stronger stock market open.
There are two more reports ahead at 10am, Business Inventories and the NAHB Housing Market Index. These are not altogether unimportant, but much less significant than the 8:30am data already digested.
ECON: Foreign Demand For Long Term US Debt Weaker in Feb
*Net Long Term Inflow 10.1 bln vs revised 102.4 bln in Jan
The U.S. Department of the Treasury today released Treasury International Capital (TIC) data for February 2012. The next release, which will report on data for March 2012, is scheduled for May 15, 2012.
In sum, the net foreign acquisition of long-term securities, the change in foreign holdings of short-term U.S. securities, and banking flows yielded monthly net TIC inflows of $107.7 billion. Of this, net foreign private inflows were $86.9 billion, and net foreign official inflows were $20.8 billion.
Foreign residents increased their holdings of long-term U.S. securities in February – net purchases were $24.8 billion. Net purchases by private foreign investors were $6.2 billion, and net purchases by foreign official institutions were $18.6 billion.
At the same time, U.S. residents increased their holdings of long-term foreign securities, with net purchases of $14.6 billion.
Taking into account transactions in both foreign and U.S. securities, the net foreign purchases of long-term securities were $10.1 billion. After including adjustments, such as estimates of unrecorded principal payments to foreigners on U.S. asset-backed securities, the overall net foreign acquisition of long-term securities is estimated to have been negative $4.9 billion in February.
Foreign residents increased their holdings of U.S. Treasury bills by $25.9 billion. Foreign resident holdings of all dollar-denominated short-term U.S. securities and other custody liabilities increased by $64.6 billion.
ECON: Empire State Manufacturing Pace of Expansion Slows
6.56 vs 18.0 consensus and 20.21 in March
The Empire State Manufacturing
Survey’s headline index fell
significantly in April, though it
still indicated a modest increase
in activity. The general business
conditions index dropped fourteen
points to 6.6, suggesting that
while growth continued, the pace
slowed over the month. The new
orders index was little changed at
6.5, indicating a modest increase
in orders, and the shipments
index fell twelve points to 6.4,
indicating a slower pace of growth
for shipments. The unfilled orders
index fell six points to -7.2, and the
delivery time index dropped three
points to 4.8. The inventories index was little changed at 1.2, suggesting
that inventory levels held steady.
Input price increases remained
signifi cant. After rising sharply
last month, the prices paid index
fell five points to 45.8. Though
somewhat lower than in March,
this reading was well above the
index’s level in the preceding
several months. Selling prices also
rose noticeably, with the prices
received index climbing six points
to 19.3. Employment indexes were
positive, but moved in opposite
directions. Pointing to a healthy
increase in employment levels, the
index for number of employees
rose six points to 19.3, its highest
level in nearly a year. The average
workweek index fell thirteen points
to 6.0, indicating a modest increase
in hours worked.
ECON: Retail Sales Beat Expectations, Core Unchanged
*Retail Sales +0.8 vs +0.3 consensus
*Previous month revised down from +1.1 to +1.0
*Core Sales unchanged at +0.5 pct
The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for March, adjusted for
seasonal variation and holiday and trading-day differences, but not for price changes, were $411.1 billion, an increase of 0.8 percent
(±0.5%) from the previous month and 6.5 percent (±0.7%) above March 2011. Total sales for the January through March 2012 period
were up 6.4 percent (±0.5%) from the same period a year ago. The January to February 2012 percent change was revised from 1.1
percent (±0.5) to 1.0 percent (±0.2%).
Retail trade sales were up 0.8 percent (±0.5%) from February 2012 and 6.5 percent (±0.7%) above last year. Building material and
garden equipment and supplies dealers sales were up 14.1 percent (±2.6%) from March 2011 and nonstore retailers were up 9.3
percent (±3.0%) from last year.
Live Chat Featured Comments
John Rodgers : "So, why did your mortgage company go out of business? I did a bunch of unlimited HARP loans that defaulted. "
Alan Craft : "I have an A/E at 147% with a PIW"
Jason Zimmer : "i've done some with crazy high CLTV, but higherst LTV for me is prob @120"
Ken Crute : "thinking a lot of crazy ltv deals are going back to servicer"
Jason Zimmer : "just to figure out if that is the sole reason for non-approval"
Michael Gannon : "sorry a bit new with HARP and I am hearing crazy LTV deals that "close" "
Matthew Graham : "to isolate your problem MG2"
Michael Gannon : "what is the point in dropping the LTV and re running if we know the value currently in is the current value?"
Jason Zimmer : "correct MG, i've done it many times and every time that ios the answer"
Matthew Graham : "soooo... ipso facto, drop LTV and re-run, changing nothing else in the file, if A/E after that, you have your answer"
John Rodgers : "If CLTV's are unlimited then why put a value on the appraisal? "
Jason Zimmer : "ding ding ding"
Matthew Graham : "are you saying unlimited LTV isn't really unlimited?"
Jason Zimmer : "lots of EA levels with high LTV"
Matt Devine : "175 ltv?"
Michael Gannon : "anyone have a clue as to why a potential HARP loan at 175 ltv with a 30 DTI and 740 credit would not be a DU accept?"
Ira Selwin : "Probably a loan that had pool insurance added to it"
Matt Hodges : "for those of you keeping track at home - the Fannie DURP ineligible was escalated. Fannie says it was a credit enhancement loan - over 80% ltv, but no MI originally"
Matthew Graham : "RTRS- U.S. FEB BUSINESS SALES +0.7 PCT VS JAN +0.4 PCT (PREV +0.4 PCT) "
Matthew Graham : "RTRS - U.S. FEB BUSINESS INVENTORIES +0.6 PCT (CONSENSUS +0.6 PCT) VS JAN +0.8 PCT (PREV +0.7 PCT) "
Matthew Graham : "RTRS- NAHB APRIL INDEX OF HOME SALES OVER NEXT SIX MONTHS 32 VERSUS REVISED 35 IN MARCH "
Matthew Graham : "RTRS - NAHB APRIL INDEX OF PROSPECTIVE BUYERS 18 VERSUS 22 IN MARCH "
Matthew Graham : "RTRS- NAHB APRIL INDEX OF CURRENT SINGLE-FAMILY HOME SALES 26 VERSUS 29 IN MARCH"
Matthew Graham : "RTRS - U.S. APRIL NAHB HOUSING MARKET INDEX 25 (CONSENSUS 28) VERSUS 28 IN MARCH "
Tony Cardinal : "support from Friday's 103-13?"
Matthew Graham : "More info than you ever wanted to know about TIC: http://www.treasury.gov/resource-center/data-chart-center/tic/Pages/ticfaq1.aspx"
Matthew Graham : "capital inflows = all foreign buying, the "treasury purchases" I think you're referring to (in the 2nd bullet I posted?) only includes notes and bonds "
Jeff Anderson : "Just asking as Capital inflows way up but treasury purchases way down. Or do these reports reflect something I'm missing which is highly likely."
Matthew Graham : "this is just foreign holdings of Treasuries"
Jeff Anderson : "So where did all the cash go? Equities?"
Matthew Graham : "RTRS - JAPAN U.S. TREASURY HOLDINGS $1.0959 TRLN IN FEBRUARY VS $1.0828 TRLN IN JANUARY "
Matthew Graham : "RTRS- CHINA U.S. TREASURY SECURITIES HOLDINGS $1.1789 TRLN IN FEBRUARY VS $1.1662 TRLN IN JANUARY "
Matthew Graham : "RTRS - FEBRUARY NET FOREIGN PURCHASES OF US TREASURY BONDS, NOTES $15.35 BLN VS $83.94 BLN PURCHASES IN JANUARY "
Matthew Graham : "RTRS- U.S. FEBRUARY NET OVERALL CAPITAL INFLOW $107.7 BLN VS REVISED $3.1 BLN INFLOW IN JANUARY "
Matthew Graham : "RTRS- NY FED'S EMPIRE STATE EMPLOYMENT INDEX AT 19.28 IN APRIL VS 13.58 IN MARCH"
Matthew Graham : "RTRS - NY FED'S EMPIRE STATE BUSINESS CONDITIONS INDEX 6.56 IN APRIL (CONSENSUS 18.0) VS 20.21 IN MARCH "
Matthew Graham : "RTRS- US MARCH RETAIL SALES EX-AUTOS +0.8 PCT (CONS +0.6 PCT) VS FEB +0.9 PCT (PREV +0.9 PCT) "
Matthew Graham : "RTRS- US MARCH RETAIL SALES +0.8 PCT (CONSENSUS +0.3 PCT) VS FEB +1.0 PCT (PREV +1.1 PCT) "