MBS and Treasuries came into today's domestic session in relatively stronger territory thanks to European headlines centered on Spain. EU officials were quoted saying that Spain has "realized the seriousness of their problem" and that the country is expected to ask for a bailout on Saturday. Open levels were very close to Monday's highs for MBS and 10yr yields stood about halfway back to Monday's lowest yields. After bottoming out, European markets began leading the charge back in a "risk-on" direction. Treasuries followed German Bunds higher in yield and MBS sold off a bit into the 11AM hour, leaving Fannie 3.5's at 105-02. That's a rather important pivot point for MBS, at least in the short term, and so far it's holding. There's nothing else left on today's calendar, but there's always a possibility of a late European headline heading into the weekend.
MBS Pricing Snapshot
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Pricing as of 11:09 AM EST
Morning Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts
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ECON: Wholesale Inventories Rise Slightly More Than Expected
* Inventories +0.6 vs +0.4 Consensus
* Sales +1.1 vs +0/3 Consensus
The U.S. Census Bureau announced today that April 2012 sales of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations and trading-day differences but not for price changes, were $415.0 billion, up 1.1 percent (+/-0.5) from the revised March level and were up 6.8 percent (+/-0.9%) from the April 2011 level. The March preliminary estimate was revised downward $0.5 billion or 0.1 percent. April sales of durable goods were up 0.1 percent (+/-0.9%)* from last month and were up 8.1 percent (+/-0.9%) from a year ago. Sales of motor vehicle and motor vehicle parts and supplies were up 3.8 percent from last month. Sales of nondurable goods were up 1.9 percent (+/-0.7%) from March and were up 5.9 percent (+/-1.2%) from last April. Sales of petroleum and petroleum products were up 4.8 percent from last month and sales of farm product raw materials were up 4.2 percent.
Total inventories of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations but not for price changes, were $483.5 billion at the end of April, up 0.6 percent (+/-0.4%) from the revised March level and were up 8.2 percent (+/-1.1%) from the April 2011 level. The March preliminary estimate was revised upward $0.1 billion. April inventories of durable goods were up 1.1 percent (+/-0.4%) from last month and were up 11.4 percent (+/-1.6%) from a year ago. Inventories of machinery, equipment, and supplies were up 2.4 percent from last month and inventories of lumber and other construction materials were up 1.9 percent. Inventories of nondurable goods were down 0.1 percent (+/-0.5%)* from March, but were up 4.0 percent (+/-1.8%) from last April. Inventories of drugs and druggists' sundries were down 2.4 percent from last month, while inventories of paper and paper products were up 3.9 percent.
Spain To Request EU Bank Aid On Saturday - Reuters
(Reuters) - Spain is expected to ask the euro zone for help with recapitalizing its stricken banks at the weekend, EU and German sources said on Friday, becoming the fourth country to seek assistance since Europe's debt crisis began.
Five officials in Brussels and Berlin said the finance ministers of the single currency area would hold a conference call on Saturday morning to discuss a Spanish request for aid, although no figure on the assistance has been set.
The Eurogroup, which comprises the 17 euro zone states, will issue a statement after the call, which is scheduled to take place before midday (1000 GMT), the sources said.
"The announcement is expected for Saturday afternoon," one of the EU officials said.
The dramatic move comes after Fitch Ratings cut Madrid's sovereign credit rating by three notches to BBB on Thursday, highlighting the Spanish banking sector's exposure to bad property loans and to contagion from Greece's debt crisis.
"The government of Spain has realized the seriousness of their problem," a senior German official said.
Fed Proposal Closely Follows Basel Capital Pact
(Reuters) - The Federal Reserve rejected pleas by the U.S. banking industry in releasing on Thursday a rigorous interpretation of an international agreement on higher capital standards for banks, known as Basel III.
U.S. banks have pushed the Fed, for instance, to allow them to more heavily count mortgage servicing rights and the unrealized gains and losses of certain securities toward their capital requirements than allowed by Basel III, but the U.S. central bank's draft rule closely follows the international agreement.
"Some of the major, major things the industry, particularly the big banks, were looking for it sounds to me like the Fed showed them no mercy," said Karen Petrou, managing partner of Washington-based Federal Financial Analytics.
ECON: Trade Deficit Roughly In Line With Expectations
The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce,
announced today that total April exports of $182.9 billion and imports of $233.0 billion resulted
in a goods and services deficit of $50.1 billion, down from $52.6 billion in March, revised. April
exports were $1.5 billion less than March exports of $184.4 billion. April imports were $4.1 billion
less than March imports of $237.1 billion.
In April, the goods deficit decreased $2.7 billion from March to $64.8 billion, and the services
surplus decreased $0.1 billion from March to $14.8 billion. Exports of goods decreased $1.5 billion
to $130.7 billion, and imports of goods decreased $4.1 billion to $195.5 billion. Exports of services
decreased $0.1 billion to $52.2 billion, and imports of services increased $0.1 billion to $37.5
The goods and services deficit increased $6.5 billion from April 2011 to April 2012. Exports were
up $7.2 billion, or 4.1 percent, and imports were up $13.8 billion, or 6.3 percent.
Focus Shifts Back To Europe, Spain Helps Bond Markets Overnight
The overnight session was generally bond-market-positive and risk-negative. Stocks saw most of their weakness just after the Asian open and stayed fairly sideways from there. Treasuries weren't as aggressively-bid right out of the chute, but became more so as a standard-issue raft of disconcerting pre-weekend headlines crossed, mostly concerning Spain.
Treasuries followed Bunds lower in yield and just a few minutes ahead of this morning's domestic economic data we find 10yr yields down to 1.57 and MBS 9 ticks improved in Fannie 3.0's to 102-23 and 6 ticks better in Fannie 3.5's at 105-06.
Live Chat Featured Comments
Matthew Graham : "RTRS - OBAMA TO DELIVER STATEMENT ON THE ECONOMY AT 10.15 AM (1415 GMT) ON FRIDAY TO URGE CONGRESS TO PASS BIPARTISAN IDEAS TO SPUR HIRING -WHITE HOUSE "
Matthew Graham : "RTRS - U.S. APRIL WHOLESALE SALES +1.1 PCT (CONSENSUS +0.3 PCT) VS MARCH +0.4 PCT (PREV +0.5 PCT) "
Matthew Graham : "RTRS - U.S. APRIL WHOLESALE INVENTORIES +0.6 PCT (CONSENSUS +0.4 PCT) VS MARCH +0.3 PCT "
Adam Quinones : "...I guess this is a step toward more transparent risk measures but it's also limiting innovation. It's impossible to get anything done nowadays. Everyone is too busy with Dodd-Frank and BASEL"
Adam Quinones : "my thought is the street has been spending all its spare time trying to deal with these regulations...now that gets passed down to all banks. $$$ and time consuming. Not sure what net effect will be on financial services jobs."
Matthew Graham : "a 6 year window that begins a year from now feels like it has to numb the effects to a reasonable degree. As far as the effects, I have less of an opinion."
Matthew Graham : "my thought is mainly the "phased in from 2013-2019" part."
Christopher Stevens : "Any thoughts on the FED approving BASEL III proposal and applying it to ALL banks regardless of asset size?"
Matthew Graham : "RTRS - US APRIL OIL IMPORT PRICE $109.94/BBL, HIGHEST SINCE AUG 2008, VS MARCH $107.95/BBL, +6.5 PCT FROM APRIL'11 $103.19/BBL"
Brayden Alexander : "Btw, new colored MBS alerts look great! Good job MG"
Matthew Graham : "RTRS - US APRIL EXPORTS -0.8 PCT VS MARCH +2.5 PCT, IMPORTS -1.7 PCT VS MARCH +5.2 PCT "
Matthew Graham : "RTRS- US APRIL TRADE DEFICIT $50.06 BLN (CONSENSUS $49.5 BLN) VS MARCH DEFICIT $52.62 BLN (PREV $51.83 BLN) "
Christopher Stevens : "Not being able to roll in CC for the FHA streamline will keep the application numbers low I think"
Victor Burek : "sv, that is only on non credit qualifying"
Scott Valins : "based on a chat from a few days ago, only if they are saving 5% or more (net-tangible benefit)"
Dan Clifton : "Brayden, i am 99% sure yes"
Brayden Alexander : "This may be a dumb question, but it is Friday, and it has been a long week. I have an FHA endorsed in 08. If I do a credit qualifying streamline from a 30 to a 20 year, are they still eligible for the reduced MIP?"
Christopher Stevens : "GM everyone. What a week! We are having our best lock week in a while."