There's not really much to today's weakness. It's moderate, it's steady, and it began yesterday. After hitting the strongest recent levels yesterday morning, MBS and Treasuries have been grinding slowly and steadily weaker. Speaking of "slowly," MBS have been fairly quiet today and yesterday, while Treasuries have been moving along at healthy clip. In both sides of the market, the movement is consistent with our assertion that there's not much to do apart from RANGE-TRADE ahead of more significant events in the coming weeks. That's a fairly high probability phenomenon unless we get a major piece of news to nudge prices/yields out of said ranges. Even then, the actual boundaries of the ranges are somewhat open to interpretation, but certainly 1.80 stands out on the high end in terms of 10yr yields. Anything under that today is pretty much 'nominal weakness.' Any improvement from current levels is gravy. 104-06 is looking supportive so far for Fannie 3.5 MBS, with 104-04 being support from earlier in the week.
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 11:05 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
MBA Increases Originations Estimate for 2012 by Almost $200 Billion
"The Mortgage Bankers Association (MBA) today announced it is increasing its mortgage origination forecast for 2012 by almost $200 billion, due entirely to an increase in refinances. MBA now expects that mortgage originations will reach $1.28 trillion in 2012, up from $1.26 trillion in 2011.
Refinance originations are now expected to total $870 billion in 2012, an almost identical amount to 2011. MBA is slightly lowering its purchase originations forecast for 2012 from $415 billion to $409 billion."
Freddie Mac: Mortgage Rates Steady at Historic Lows
30-year fixed-rate mortgage (FRM) averaged 3.78 percent with an average 0.8 point for the week
ending May 24, 2012, down from last week when it averaged 3.79 percent. Last year at this time, the
30-year FRM averaged 4.60 percent.
15-year FRM this week averaged 3.04 percent with an average 0.7 point, unchanged from last week.
A year ago at this time, the 15-year FRM averaged 3.78 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.83 percent this week,
with an average 0.6 point, unchanged from last week. A year ago, the 5-year ARM averaged 3.41
1-year Treasury-indexed ARM averaged 2.75 percent this week with an average 0.4 point, down
from last week when it averaged 2.78 percent. At this time last year, the 1-year ARM averaged 3.11
Bond Markets Looking For Support After Opening Slightly Weaker
It wasn't a great overnight session for bonds, though it wasn't catastrophic by any means. After yields followed yesterday's late stock rally higher on rumors that the EU is considering guaranteeing certain bank deposits, those weaker treading levels were maintained in relatively low volume into the Asian session.
European hours saw 10's move back lower in yield, near the best levels of the New York session into Germany's weaker than expected IFO Business Climate data. But paradoxically, yields snapped back to the upside following the data and domestic traders were standing in line outside the doors of the New York open to pile on that bandwagon.
As we said in the The Day Ahead
, we're not so eager to attribute each and every little move today as perfectly connected to a causal source, but rather, we expect a range trade ahead of more important data in the coming weeks, with markets using ostensibly significant pieces of data or technical levels as cues to adjust levels INSIDE that range.
That seems like what we're seeing in the overnight session, and it looks like technical levels outweighed the fundamental assessment of the weaker-than-expected data in the European session. Now we have weaker-than-expected data at home and markets have mostly faded that as well. 10yr yields are up another bp or so from data time and MBS are perhaps holding their ground slightly better with Fannie 3.5's down 5 ticks on the morning at 104-08.
We'd caution though, that from these mid 1.76 levels in 10yr yields, the next technical stop is a quick jump to at least 1.78 if not 1.79 (bottom of intermediate term trend channel from early April), and that's a storm MBS might be less willing to weather so gracefully.
ECON: Durable Goods Rise Less Than Expected
* Headline Durables +0.2 vs +0.5 consensus
* Excluding Transportation -0.6 vs +0.9 consensus
New orders for manufactured durable goods in April
increased $0.3 billion or 0.2 percent to $215.5 billion,
the U.S. Census Bureau announced today. This increase,
up two of the last three months, followed a 3.7 percent
March decrease. Excluding transportation, new orders
decreased 0.6 percent. Excluding defense, new orders
increased 1.2 percent.
Transportation equipment, also up two of the last three
months, had the largest increase, $1.3 billion or 2.1
percent to $62.2 billion. This was due to motor vehicles
and parts, which increased $2.3 billion.
Shipments of manufactured durable goods in April, up
four of the last five months, increased $1.5 billion or 0.7
percent to $222.7 billion. This followed a 1.0 percent
Transportation equipment, also up four of the last five
months, had the largest increase, $1.9 billion or 3.1
percent to $63.8 billion. This followed a 2.3 percent
Unfilled orders for manufactured durable goods in
April, down following twenty-seven consecutive
monthly increases, decreased $0.7 billion or 0.1 percent
to $985.3 billion. This followed a slight March increase.
Transportation equipment, down two consecutive
months, had the largest decrease, $1.6 billion or 0.3
percent to $566.4 billion.
Inventories of manufactured durable goods in April, up
twenty-seven of the last twenty-eight months, increased
$1.1 billion or 0.3 percent to $364.1 billion. This was at
the highest level since the series was first published on a
NAICS basis in 1992 and followed a 0.4 percent March
Machinery, up twenty-five of the last twenty-six
months, had the largest increase, $1.1 billion or 1.7
percent to $65.2 billion. This was also at the highest
level since the series was first published on a NAICS
ECON: Jobless Claims Hit Expectations at 370k
*Claims 370k vs 370k consensus
* Continued Claims 3.26 mln vs 3.25 mln consensus
* Previous week revised higher to 372k
In the week ending May 19, the advance figure for seasonally adjusted initial claims was 370,000, a decrease of 2,000 from the previous week's revised figure of 372,000. The 4-week moving average was 370,000, a decrease of 5,500 from the previous week's revised average of 375,500.
The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending May 12, unchanged from the prior week's unrevised rate.
The advance number for seasonally adjusted insured unemployment during the week ending May 12 was 3,260,000, a decrease of 29,000 from the preceding week's revised level of 3,289,000. The 4-week moving average was 3,271,500, a decrease of 17,250 from the preceding week's revised average of 3,288,750.
Live Chat Featured Comments
Victor Burek : "they could possibly have a overlay where they wont ever do it"
Aaron Buyside Meyer : "Summit Credit Union in Madison is telling people this"
Victor Burek : "false, same as foreclosure"
Aaron Buyside Meyer : "FHA ?, a credit union told a client that if you have had a deed in leu of foreclosure you can NEVER get a FHA loan again, thoughts? I question the harshness of Never?"
Gus Floropoulos : "Q2 2007 was a hell of a Q for bank earnings"
Matthew Graham : "RTRS- FDIC SAYS EARNINGS INCREASE FROM ONE YEAR EARLIER LARGELY DUE TO BANKS' SETTING ASIDE LESS TO GUARD AGAINST LOSSES "
Matthew Graham : "RTRS - FDIC SAYS BANK EARNINGS IN Q1 2012 ARE HIGHEST SINCE Q2 2007 "
Gus Floropoulos : "heres a site u can track encompass status- http://emstatuscenter.com/ "
Gus Floropoulos : "but u can bypass encompass, and then upload it "
Matt Hodges : "mm - do a quick search - you'll see problems going back a few days"
MMNJ : "anyone having issues running AUS through Encompass? Been having problems since yesterday"
Andrew Horowitz : "political imagination would have worked about 200 years ago, now with technology being what it is, and each country wanting to maintain its own sovereignty it is too late. There have been too many cros border conflicts and those old wounds just don't heal overnight, just look at the former Yugoslavia as an example"
Mike Drews : "anyone have an idea what the interest rate would be a 10 year 2mil commercial loan?"
Matthew Graham : "just interesting that the ECB president--seemingly speaking in the same vein as Rompuy--refers to the process as one of "political imagination""
Adam Quinones : "Capitilized Socialism"
Matthew Graham : "all hail Pres. Von Rompuy?"
Adam Quinones : "hahahahahah"
Matthew Graham : "United states of Europe? "
Matthew Graham : "with the Eurobond talk ramping up, and Rompuy saying y'day that EU leaders "agreed to strengthen the economic union to match the monetary union," and that the June summit will tackle "the how" in all this, I wonder what "the how" is going to look like..."
Matthew Graham : "RTRS- DRAGHI SAYS EURO ZONE GOVTS NEED TO SPELL OUT COMMON VISION OF POLITICAL, ECONOMIC FOUNDATION FOR EURO "
Matthew Graham : "RTRS - DRAGHI SAYS FOR PROCESS OF EU INTEGRATION TO SURVIVE IT NEEDS "COURAGEOUS LEAP OF POLITICAL IMAGINATION" "
Matthew Graham : "ECB Pres Mario Draghi on the wires at the moment, saying many generic and familiar things, but one caught my attention:"
Adam Quinones : "my clients don't divulge too much in that regard and I always funded from a bank line so I dont have a lot of experience"
Christopher Stevens : "For instance my avg rate for Q1 was 3.958% and warehouse rate is 4.54 (58bp neg spread)"
Christopher Stevens : "MG/AQ- do either of you have an idea what a good negative spread is between Avg. rate on loans funded and what the warehouse lender is charging?"
Matthew Graham : "RTRS- US APRIL NONDEFENSE CAP ORDERS EX-AIRCRAFT -1.9 PCT (CONS +0.7 PCT) VS MARCH -2.2 PCT (PREV -3.6 PCT) "
Matthew Graham : "RTRS- U.S. APRIL DURABLES EX-DEFENSE +1.2 PCT (CONS +0.4 PCT) VS MARCH -3.9 PCT (PREV -4.3 PCT) "
Matthew Graham : "RTRS - U.S. APRIL DURABLES EX-TRANSPORTATION -0.6 PCT (CONS +0.9 PCT) VS MARCH -0.8 PCT (PREV -1.3 PCT) "
Matthew Graham : "RTRS - US APRIL DURABLES ORDERS +0.2 PCT (CONS. +0.5 PCT) VS MARCH -3.7 PCT (PREV -3.9 PCT) "
Matthew Graham : "RTRS- US CONTINUED CLAIMS FELL TO 3.260 MLN (CON. 3.250 MLN) MAY 12 WEEK FROM 3.289 MLN PRIOR WEEK (PREV 3.265 MLN) "
Matthew Graham : "RTRS- US JOBLESS CLAIMS 4-WK AVG FELL TO 370,000 MAY 19 WEEK FROM 375,500 PRIOR WEEK (PREVIOUS 375,000) "
Matthew Graham : "RTRS - US JOBLESS CLAIMS FELL TO 370,000 MAY 19 WEEK (CONSENSUS 370,000) FROM 372,000 PRIOR WEEK (PREVIOUS 370,000) "