MBS Live: MBS Morning Market Summary
Rather than stand out as one of those examples of "a major headline event causing a major, sudden shift" in bond markets, today has been more of a determined snow-ball of risk aversion and duration-grabbing, albeit with growing momentum and speed.  In other words, we haven't seen 10yr yields shoot "straight down" on the heels of any particular headline, it's just that they've moved "relatively sharply down on the heels of almost every headline!"  10's made it into the 1.53's, officially an undisputed all-time low.  MBS Hit all time highs with Fannie 3.5's into the 105's and Fannie 3.0's over 102-16.  The whole of "risk" has made similar movements with 10yr yields sharing a high degree of correlation with stock prices, German Bunds, and the Euro.  For their part, MBS could fall several ticks more and STILL be maintaining a rally trend at all time highs.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.5
105-01 : +0-08
FNMA 4.0
106-21 : +0-09
FNMA 4.5
107-11 : +0-04
FNMA 5.0
108-14 : +0-02
GNMA 3.5
106-24 : +0-08
GNMA 4.0
109-09 : +0-04
GNMA 4.5
109-24 : -0-01
GNMA 5.0
110-18 : -0-02
104-25 : +0-07
106-05 : +0-05
106-25 : +0-01
107-22 : +0-01
Pricing as of 11:08 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 this morning.

10:03AM  :  Freddie Mac: 15-Year Fixed Rate Mortgage Falls Below 3%
30-year fixed-rate mortgage (FRM) averaged 3.75 percent with an average 0.8 point for the week ending May 31, 2012, down from last week when it averaged 3.78 percent. Last year at this time, the 30-year FRM averaged 4.55 percent.

15-year FRM this week averaged 2.97 percent with an average 0.7 point, down changed from last week when it averaged 3.04 percent. A year ago at this time, the 15-year FRM averaged 3.74 percent.

5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.84 percent this week, with an average 0.6 point, up from last week when it averaged 2.83. A year ago, the 5-year ARM averaged 3.41 percent.

1-year Treasury-indexed ARM averaged 2.75 percent this week with an average 0.4 point, unchanged from last week. At this time last year, the 1-year ARM averaged 3.13 percent.
9:50AM  :  ECON: Chicago Purchasing Managers Index Weaker Than Expected
* PMI 52.7 vs consensus 56.5

May 2012: The Chicago Purchasing Managers reported the May Chicago Business Barometer decreased for a third consecutive month to its lowest level since September 2009. The short term trend of the Chicago Business Barometer, and all seven Business Activity indexes, declined in May.

Among the Business Activity measures, only the Supplier Delivery index expanded faster while Order Backlogs and Inventories contracted.

The Production index fell to neutral while, inexplicably, measures of Business Policy advanced.

• PRODUCTION and NEW ORDERS lowest since September 2009;
• PRICES PAID lowest since September 2010;
• EMPLOYMENT rate of growth slowed
9:31AM  :  ALERT ISSUED: Bond Markets Open Flat; Turn Stronger Following Data
Despite yesterday being a tough act to follow, both MBS and Treasuries are carving out incrementally stronger record levels after a raft of weaker-than-expected economic data. All across the board this morning, things were in line with expectations or worse:

- Challenger Job Cuts were an 61k vs 40k previously
- ADP Employment was 133k vs a 148k forecast
- Jobless Claims were 383k vs a 370k forecast
- GDP was an as-expected +1.9%, but corporate profits were down 4.1% vs a +1.1% consensus, the largest drop since Q4 2008

All told, it was enough to nudge 10yr yields briefly down to another record low of 1.593 while Fannie 3.5 MBS hit another record high of 104-29+. Fannie 3.0's also hit a record of 102-14.

Records aside, we haven't seen any follow through at these levels and markets are moving sideways in slightly less aggressive territory. But with 1.5983 10yr yields and MBS holding at the highs, we're not exactly looking at a panicked bounce weaker either.

Next piece of domestic data on the calendar is Chicago PMI at 9:45am.
8:40AM  :  ECON: GDP In Line With Expectations
* Headline GDP +1.9 vs +1.9 consensus, previously +2.2
*Consumer Spending +2.7 pct vs +2.9 pct previously

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 1.9 percent in the first quarter of 2012 (that is, from the fourth quarter to the first quarter), according to the "second" estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2011, real GDP increased 3.0 percent.

The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 2.2 percent (see "Revisions" on page 3).

The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, residential fixed investment, private inventory investment, and nonresidential 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 deceleration in real GDP in the first quarter primarily reflected a deceleration in private inventory investment, an acceleration in imports, and a deceleration in nonresidential fixed investment that were partly offset by accelerations in exports and in PCE.
8:36AM  :  ECON: Jobless Claims Higher Than Expected
* Claims +383k vs 370k consensus
* 4wk moving ave rises to 374.5k from 370.75k
* Benefit exhaustion leads to fall in continuing claims, lowest since July 2008,

In the week ending May 26, the advance figure for seasonally adjusted initial claims was 383,000, an increase of 10,000 from the previous week's revised figure of 373,000. The 4-week moving average was 374,500, an increase of 3,750 from the previous week's revised average of 370,750.

The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending May 19, unchanged from the prior week's unrevised rate.

The advance number for seasonally adjusted insured unemployment during the week ending May 19 was 3,242,000, a decrease of 36,000 from the preceding week's revised level of 3,278,000. The 4-week moving average was 3,263,750, a decrease of 12,000 from the preceding week's revised average of 3,275,750.
8:18AM  :  ECON: ADP Employment Lower Than Expected
* Private Payrolls +133k vs 148k consensus
* Last month revised down to 113k from 119k

Private-sector employment increased by 133,000 from April to May on a seasonally adjusted basis, according to the latest ADP National Employment Report® released today. The ADP National Employment Report, created by Automatic Data Processing, Inc. (ADP®), in partnership with Macroeconomic Advisers, LLC, is derived from actual payroll data and measures the change in total nonfarm private employment each month. The estimated gain from March to April was revised down modestly, from the initial estimate of 119,000 to a revised estimate of 113,000.
Live Chat Featured Comments
A recap of the featured comments from the MBS Live Dashboard's Live Chat feature, utilized by hundreds of industry professionals each day.

Brent Borcherding  :  "Nobody is rooting against the economy and there is absolutely nothing wrong with coming to a place like this, staying informed better than your peers, and planning accordingly so that you an provide. Actually it is your obligation."
Victor Burek  :  "i agree..seems we root against economy, but if it walks like a duck, quacks like a duck..its a duck"
Matthew Graham  :  "i was thinking about saying something to the effect of feeling sort of guilty or "bad" sometimes being an economic bear... I mean, it's not like we WANT the global economy to be in this desuetude. It just is what it is."
Matthew Graham  :  "yeah, that... well-said. I was just trying to think of a way to phrase that, but yours is shorter and better"
Brent Borcherding  :  "Hope can blind one from reality, VB."
Victor Burek  :  "i dont see how anyone didnt see this coming with europe imploding"
Matthew Graham  :  "BB is on that list too"
Matthew Graham  :  "a hearty congratulations to Vic, B-C, JW, and anyone else that called "105" and/or "best-rates ahead this spring" around mid-March. "
Matthew Graham  :  "two different phenomena anyway... In the case of QE, low rates are a "cause." In the case of the E-Z crisis, they're an "effect.""
Christopher Stevens  :  "Let me rephrase that...I think the yld is low enough that the Fed does not have to use QE3"
Matthew Graham  :  "uhh... pretty sure they could get it as low as they want. whether or not that's a good idea is another story."
Christopher Stevens  :  "the Fed could not have gotten the 10YR this low with QE3"
Christopher Stevens  :  "No need for QE3 with Spain, Italy and Greece doing the work for the Fed"
Adam Quinones  :  "warm the tar and start plucking feathers..."
Victor Burek  :  "150kish"
Andy Pada  :  "What is tomorrow's payroll # forecast?"
Tom Schwab  :  "hmmm... the market appears to be endorsing the Mayan calendar and the end of the world."
Jason Harris  :  "Chris is spot on....I will be interested to see if we get much improvement with capacity already pressed to the edge"
Oliver S. Orlicki  :  "1.59 wow!"
Andy Pada  :  "I guess the parade of horribles has come to town"
Adam Dahill  :  "turntimes are horrendous and not getting any better"
Christopher Stevens  :  "banks are in no hurry to lower rates with refi's at the current levels"
Victor Burek  :  "i still have the 3.5"
Gus Floropoulos  :  "who else has switched their current chart to the fnma 3.0?"
Matthew Graham  :  "RTRS - US Q1 CORPORATE PROFITS DROP LARGEST SINCE Q4 2008 (-26.5 PCT) "
Matthew Graham  :  "RTRS - US Q1 CORPORATE PROFITS AFTER TAX -4.1 PCT (CONS +1.1 PCT), VS Q4 +1.1 PCT (PREV +1.1 PCT) "
Matthew Graham  :  "RTRS- US Q1 CONSUMER SPENDING +2.7 PCT (PREV +2.9 PCT), DURABLES +14.3 PCT (PREV +15.3 PCT) "
Matthew Graham  :  "RTRS - US PRELIM Q1 GDP +1.9 PCT (CONSENSUS +1.9 PCT), PREV +2.2 PCT; FINAL SALES +1.7 PCT (CONS +1.5 PCT), PREV +1.6 PCT "
Matthew Graham  :  "RTRS- US CONTINUED CLAIMS FALL TO 3.242 MLN (CON. 3.250 MLN) MAY 19 WEEK FROM 3.278 MLN PRIOR WEEK (PREV 3.260 MLN) "
Matthew Graham  :  "RTRS - US JOBLESS CLAIMS 4-WK AVG RISES TO 374,500 MAY 26 WEEK FROM 370,750 PRIOR WEEK (PREVIOUS 370,000) "
Matthew Graham  :  "RTRS - US JOBLESS CLAIMS RISE TO 383,000 MAY 26 WEEK (CONSENSUS 370,000) FROM 373,000 PRIOR WEEK (PREVIOUS 370,000)"
Jason Harris  :  "Not sure what was rigt or wrong....but the appraiser in question was in the process of being taken off of our AMC list for shoddy work and bad turn times totally unrelated to value"
Matt Hodges  :  "so, gray area, jason?"
Jason Harris  :  "I have had the same thing....more a request that we use someone else....we sent another appraiser out"
Victor Burek  :  "if thats the case, then cant be done"
Matt Hodges  :  "but remember who instituted HVCC originally"
Matt Hodges  :  "that would be "logical""
Victor Burek  :  "client is paying for it, they should be able to refuse"
Matt Hodges  :  "the FAQs don't address refusal of assignment by a Realtor or borrower"
Matt Hodges  :  "they ended up doing that, but put up a big stink"
Victor Burek  :  "so the AMC assigned to new appraiser"
Victor Burek  :  "i just had a realtor for a seller refuse an appraiser assignment...she knew the appraiser"
Matt Hodges  :  "can a borrower refuse appraiser assignment, for example because of distance from their office to property location?"
Jason Harris  :  "These times are ridiculous....everyday that I see rates like this I think about how freaking lucky we are. Make as much of this opportunity every day as you can!"

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