A similar theme is playing out this morning where we find 10yr TSYs digging into the 1.5's and MBS having hit a ceiling, seemingly unwilling to trudge much higher for the standard list of reasons (capacity, underperforming flights-to-safety, volatility, and lower coupon liquidity). Any way you slice it, Fannie 3.5's have been capped out at 105-03 while 10yr Treasuries have stair-stepped lower from 1.62 this morning to 1.57 currently. C'est la vie for mortgages...
None of this morning's movement is data-related by the way, even if it might look like it superficially. This move in Treasuries was well underway before any of the data hit, and there have been no noticeable volume spikes centered on any of this morning's releases.
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
Bond Markets Ratchet To Stronger Levels, With or Without Econ Data
It sure would be tempting to chalk up the first major gains of the day to Empire State Manufacturing at 8:30, but 10yr yields has already fallen from 1.628 to 1.597 in the 45 minutes BEFORE the report. There was no discernible volume pop on that, or any of the mornings data. As we said in The Day Ahead
, no one would be expected to care about economic data today anyway.
Sliding stocks, German Bunds, and Euros all led US Treasuries lower before the open, and domestic traders were waiting to "buy the dip" (in this case, "ceiling" in terms of yields) at yesterday's 1.62+ pivot. In fact, 1.62+ is roughly the mid-point of the triangle that has been forming in early June, and yesterday afternoons high yields provided a clear bounce on the high side, making for a logical inflection--type movement around the mid point, and another bounce to the lower, stronger side of the triangle.
In fact, things have been so strong this morning (some small measure of panic and/or risk aversion setting in before the weekend), that you could even consider 10yr yields are testing a breakout of that triangle. But it's not uncommon to see this sort of "lead-off" in one direction or another, shortly before a key event and near the apex of converging trends. The breakout here--if there is one--doesn't mean much from a technical perspective given that it occurs not only on a Friday, but also that it occurs BEFORE the event that we'd associate with the breakout.
Long story short, nothing is happening... Really... Bond markets are stronger, MBS are up 7 ticks in Fannie 3.5's hovering around 105-00, but it's purely coincidental. Things could very much go either way today, and with zero regard for economic data. The other side of the triangle is about 1.64-1.65. Resting on the stronger end for now is just a bonus ahead of the events that can either justify or preclude further rallying, beginning with The Greekend.
ECON: Industrial Production -0.1 Pct vs +0.1 Pct Consensus
Industrial production edged down 0.1 percent in May after having gained 1.0 percent in April. A decrease of 0.4 percent for manufacturing production in May partially reversed a large increase in April. Outside of manufacturing, the output of mines advanced 0.9 percent in May, while the output of utilities rose 0.8 percent. At 97.3 percent of its 2007 average, total industrial production in May was 4.7 percent above its year-earlier level. Capacity utilization for total industry declined 0.2 percentage point to 79.0 percent, a rate 1.3 percentage points below its long-run (1972--2011) average.
ECON: Foreign Accounts Buy Slightly Less Long Term Treasuries
WASHINGTON – The U.S. Department of the Treasury today released Treasury International Capital (TIC) data for April 2012. The next release, which will report on data for May 2012, is scheduled for July 17, 2012.
The sum total in April of all net foreign acquisitions of long-term securities, short-term U.S. securities, and banking flows was a monthly net TIC outflow of $20.5 billion. Of this, net foreign private outflows were $23.7 billion, and net foreign official inflows were $3.2 billion.
Foreign residents increased their holdings of long-term U.S. securities in March – net purchases were $26.1 billion. Net purchases by private foreign investors were $15.4 billion, and net purchases by foreign official institutions were $10.7 billion.
At the same time, U.S. residents increased their holdings of long-term foreign securities, with net purchases of $0.6 billion.
Taking into account transactions in both foreign and U.S. securities, the net foreign purchases of long-term securities were $25.6 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 $8.4 billion in March.
Foreign residents decreased their holdings of U.S. Treasury bills by $16.2 billion. Foreign resident holdings of all dollar-denominated short-term U.S. securities and other custody liabilities decreased by $5.6 billion.
Banks' own net dollar-denominated liabilities to foreign residents decreased by $23.3 billion.
Complete data are available on the Treasury website at:
Live Chat Featured Comments
Matthew Graham : "first of all, the short answer is "nothing." there's no way to have guaranteed today would be green as of yesterday. I got the hindsight 20/20 answer coming up"
Lion : "Would someone please tell me what was in the tea leaves yesterday that would lead one to predict today's stronger bond market? I just got to know"
Matthew Graham : " - THOMSON REUTERS/U. OF MICH CONSUMER SENTIMENT, CURRENT CONDITIONS AND EXPECTATIONS INDEXES ALL AT LOWEST SINCE DEC 2011 "
Matthew Graham : " THOMSON REUTERS/U. OF MICH US CONSUMER SENTIMENT PRELIMINARY JUNE 74.1 (CONSENSUS 77.5) VS MAY FINAL 79.3 "
Jason Zimmer : "caliber just annocunced they are getting rid of SL "
Lynn ONeal : "MG- I talked to a higher up at Wells yesterday, he said it was just a capacity issue for Wells and would likely last 4-6 months"
Steven Stone : "i think most everyone was selling the streamlines to wells"
Matthew Graham : "CK, just saw your chat from late last night. My understanding of "the plague" is that it's merely a domino effect from Wells. Additional announcements have been rolling in over the past few days."
rford : "ABL - Always be Locking!"
Matthew Graham : "3.625 best-ex on the Friday before the most potentially volatile 5 days since August 2011. Hard to float that, regardless of where you think rates are going."
Andy Pada : "stupid CNBC throws out "Lehman Weekend" to mess with my mind"
Andy Pada : "this rally is forcing me to lock before the weekend"
Matthew Graham : "RTRS - U.S. MAY INDUSTRIAL OUTPUT -0.1 PCT (CONSENSUS +0.1 PCT) VS APRIL +1.0 PCT (PREV +1.1 PCT) "
Matthew Graham : "RTRS - JAPAN U.S. TREASURY HOLDINGS $1.0661 TRLN IN APRIL VS $1.0763 TRLN IN MARCH "
Matthew Graham : "RTRS - CHINA U.S. TREASURY SECURITIES HOLDINGS $1.1455 TRLN IN APRIL VS $1.144 TRLN IN MARCH "
Matthew Graham : "RTRS- APRIL NET FOREIGN PURCHASES OF US TREASURY BONDS, NOTES $37.3 BLN VS $20.1 BLN PURCHASES IN MARCH "
Matthew Graham : "RTRS - U.S. APRIL NET LONG-TERM INFLOW (EX-SWAPS/OTHER) $25.6 BLN VS REV $36.0 BLN INFLOW IN MARCH "
Brent Borcherding : "I hear Wells is going to only allow VA streamlines with 700+ scores."
Gaius Rossini : "rood - if you're reading this, i know the compare ratio thing was announced in the obama refi initiative on Feb. 1st, but not sure where it is officially."
Ira Selwin : "If the HVE has ‘no hit’ or a confidence score other than “H” or “M”, a Conventional exterior-only appraisal (Form 2055) must be
substituted as the source used to calculate a current LTV.
Correspondent Lenders will be required to include the HVE or exterior appraisal in their loan files. M&T will require an
Underwriter note showing the calculation of the “current” LTV used to determine pricing. This note may NOT appear on the FHA
Transmittal. Underwriters shall use the original appraised value, f"
Ira Selwin : "Non M&T-to-M&T FHA Streamline Refinance Transactions
M&T is pleased to announce that Non M&T-to-M&T FHA Streamline Refinance transactions are now eligible subject to the
guidance described below.
Non M&T-to-M&T FHA Streamline pricing is based on a newly calculated “current” LTV obtained by using the value from a
required AVM report, the Freddie Mac HVE."
Ira Selwin : "Not sure if the M&T memo was posted:"
Steven Stone : "Chris Kopec: Which two lenders was it?"
Jeff Anderson : "Gm, all. If you mean you're playing defense today, I'd agree. "
Andy Pada : "I'm acting as if the markets will love the results of this weekend's elections. Other than that, I am rooting for Tiger to win the US Open."
Chris Kopec : "Is there a plague that just hit FHA Streamlined loans??? Just received notice that 2 of my lenders are no longer doing FHA Streamlines. "