The main market-mover of the morning was the release of the Philadelphia Fed Survey, the chief component of which fell from 8.5 last month to -5.8 today. This happens occasionally with regional manufacturing reports and particularly, we're reminded of the August Philly Fed Index that fell to -22 from a +6.2 in July. Although that instance constituted a bigger discrepancy, today's is arguably as much of a surprise considering the recent relative stability of the data (or even "uptrend" with the exception of last month's minor pull-back). Amazingly, it kicked off the biggest hour of volume of the week by a small margin over y'day's hour following the Greece/ECB news. MBS hit another all time high albeit by a small margin and 10yr yields now trade under 1.75. It's impressive, and perhaps comforting to see domestic economic data retain some of its ability to move markets. Then again, this Philly Fed, or rather, the market movement following it, likely has more to do with QE expectations than the data itself.
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Fixed Mortgage Rates Hit Record Lows Again - Freddie PMMS
MCLEAN, Va., May 17, 2012 /PRNewswire/ -- Freddie Mac (OTC: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates again hitting new record lows. The 30-year fixed-rate mortgage at 3.79 percent continues to remain well below 4 percent and 15-year fixed-rate mortgages are also slightly down at 3.04 percent.
- 30-year fixed-rate mortgage (FRM) averaged 3.79 percent with an average 0.7 point for the week ending May 17, 2012, down from last week when it averaged 3.83 percent. Last year at this time, the 30-year FRM averaged 4.61 percent.
-15-year FRM this week averaged 3.04 percent with an average 0.7 point, down from last week when it averaged 3.05 percent. A year ago at this time, the 15-year FRM averaged 3.80 percent.
-5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.83 percent this week, with an average 0.6 point, up from last week when it averaged 2.81 percent. A year ago, the 5-year ARM averaged 3.48 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.
ECON: Leading Indicators Decline First Time in 7 Months
The Conference Board Leading Economic Index® (LEI) for the U.S. declined 0.1 percent in April to 95.5 (2004 = 100), following a 0.3 percent increase in March, and a 0.7 percent increase in February.
Says Ataman Ozyildirim, economist at The Conference Board: “The LEI declined slightly in April. Falling housing permits, rising initial claims for unemployment insurance and subdued consumer expectations offset small gains in the remaining components. The LEI’s six-month growth rate fell slightly, but remains in expansionary territory and well above its growth at the end of 2011. The CEI, a measure of current economic conditions, has also increased for five consecutive months.”
Says Ken Goldstein, economist at The Conference Board: “The indicators reflect an economy that’s still struggling to gain momentum. Growth is slow, but choppy, and consumers, executives and investors are looking for more progress.”
ECON: Big Miss For Philly Fed Index
*Index -5.8 vs +10.0 consensus, +8.5 last month
* Most of the survey's internals were ugly as well
* Bond markets rallying on this data
Firms responding to May’s Business Outlook Survey indicated that manufacturing growth fell back from the pace of recent months. The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, fell from a reading of 8.5 in April to -5.8 in May.
The survey’s broad indicators for general activity fell into negative territory for the first time in eight months. Firms reported lower levels of activity and nearly flat new orders and employment. Overall price pressures were reported to be on the wane this month. The outlook among the reporting firms was notably less optimistic.
In special questions this month, firms were asked about the factors that are influencing their production and hiring plans. Among the top three factors restraining hiring, the need to keep operating costs low (50 percent) ranked nearly as high as expected low sales growth (51 percent). Uncertainty about health-care costs, the inability to find skilled workers, and uncertainty about regulations and policies were also prominently listed.
Bond Markets Holding Most of Yesterday's Gains
The overnight session was fairly uneventful given the context of recent multi-month records in several markets, a fair amount of volatility and high volume in y'day's session. 10yr yields opened the Asian session slightly higher but bounced lower before breaking 1.80 to head under 1.76 just before the domestic open. MBS opened unchanged from y'day's close at 104-13 and trade there currently. 10's are at 1.764.
As we wagered in the Day Ahead
, the data so far this morning has been a non-issue, and with headlines relatively silent out of Europe, volume/volatility are noticeably lower than y'day.
The Philly Fed Index is coming out in just over 10 minutes, along with Leading Indicators, but the market continues to be focused on Europe. Even without readily available headlines, European markets are providing the cues this morning. To that end, German Bunds (EU 10yr Benchmark) and the Euro itself are the guidance givers to broader "risk on/risk off" trading. At the moment, it's "risk off" at the domestic stock market open. S&P futures are down a quick 5 points from 9:29am levels.
ECON: Jobless Slightly Higher Than Expected
*Claims 370k vs 365k consensus
* Previous week revised up from 367k to 370k
* Continued Claims rose to 3.265 mln vs 2.235 mln consensus
In the week ending May 12, the advance figure for seasonally adjusted initial claims was 370,000, unchanged from the previous week's revised figure of 370,000. The 4-week moving average was 375,000, a decrease of 4,750 from the previous week's revised average of 379,750.
The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending May 5, unchanged from the prior week's revised rate.
The advance number for seasonally adjusted insured unemployment during the week ending May 5 was 3,265,000, an increase of 18,000 from the preceding week's revised level of 3,247,000. The 4-week moving average was 3,282,750, a decrease of 11,750 from the preceding week's revised average of 3,294,500.
Live Chat Featured Comments
Brett Boyke : "could get ugly over there"
Brett Boyke : "Aldolfo Laurenti , Mesirow Financial - "A run on Greek banks is currently going on. According to a statement by the Greek president and confirmed by the central bank in Athens, depositors withdrew nearly $900 million from bank deposits on Monday. Data are not yet available on outflows for Tuesday and today, but the European Central Bank (ECB) announced measures that hint at continued bleeding from the Greek banking sector."
Jason York : "here is a tidbit of VA knowledge to store away for future use: for a VA loan, if public utilities are available, then the property must by hooked up to them. Unless it is not feasible, i.e. it costs too much, in which you can apply for a waiver from VA"
Michael Gannon : "if hasnt been drawn in last 12 months for a HELOC "
Michael Gannon : "unless taken at same time to purchase its always a CO except on FHA"
Michael Gannon : "yes"
B-C : "hey people. FNMA refi, 2nd is a closed end, oepn for 6 years, not used to purchase. FNMA considers cash out still?"
Matthew Graham : "RTRS - U.S. APRIL LEADING ECONOMIC INDICATORS -0.1 PCT, FIRST DECLINE IN 7 MONTHS, (CONSENSUS +0.1 PCT) VS MARCH +0.3 PCT "
John Paul Mulchay : "hey, brokers first is back up!"
Andrew Horowitz : "philly is more followed per liesman, and I agree"
Matthew Graham : "RTRS- PHILADELPHIA FED BUSINESS CONDITIONS INDEX AT LOWEST SINCE SEPT 2011 "
Andrew Horowitz : "yes"
Victor Burek : "so philly bigger?"
Andrew Horowitz : "ny mfg is minimal"
Matthew Graham : "RTRS - PHILADELPHIA FED SIX-MONTH CAPITAL EXPENDITURES OUTLOOK MAY 5.3 VS APRIL 21.7 "
Patrick Waldron : "This week has just been the perfect storm."
Matthew Graham : "RTRS- PHILADELPHIA FED EMPLOYMENT INDEX MAY -1.3 VS APRIL 17.9 "
Victor Burek : "and ny fed was a big beat"
Andrew Horowitz : "ouch"
Matthew Graham : "RTRS- PHILADELPHIA FED SIX-MONTH BUSINESS CONDITIONS MAY 15.0 VS APRIL 33.8 "
Victor Burek : "wow\"
Matthew Graham : "RTRS- PHILADELPHIA FED BUSINESS CONDITIONS MAY -5.8 (CONSENSUS 10.0) VS APRIL 8.5 "
Victor Burek : "that sounds like a great idea"
Brent Borcherding : "I may take the next couple days off, let this set in, and start originating refis next week."
Matthew Graham : "equities falling at the cash open, a quick 5 pts in S&Ps"
Matthew Graham : "http://dealbook.nytimes.com/2012/05/16/jpmorgans-trading-loss-is-said-to-rise-at-least-50/"
Brent Borcherding : "Where did you see that, MG &/or SS?"
Andrew Russell : "Really? 3 bill? "
Steven Stone : "yup"
Matthew Graham : "you guys see JPMorgan's $2bln loss now up to $3bln?"
Matthew Graham : "RTRS - US CONTINUED CLAIMS ROSE TO 3.265 MLN (CON. 3.235 MLN) MAY 5 WEEK FROM 3.247 MLN PRIOR WEEK (PREV 3.229 MLN) "
Matthew Graham : "RTRS - US JOBLESS CLAIMS 4-WK AVG FELL TO 375,000 MAY 12 WEEK FROM 379,750 PRIOR WEEK (PREVIOUS 379,000) "
Matthew Graham : "RTRS - US JOBLESS CLAIMS UNCHANGED AT 370,000 MAY 12 WEEK (CONSENSUS 365,000) FROM 370,000 PRIOR WEEK (PREVIOUS 367,000) "
Steven Stone : "there are buyers out there too, bid offer is still wide, but you can hit screen pricing"
Steven Stone : "i sold 25mm of 3 cpn"
Gaius Rossini : "there's been origination selling, maybe 300mm for the week by the end of tomorrow, and some mm trading"