Yesterday may have been disconcerting for some MBS market watchers in the sense that recently attained and surprisingly stable price action in Fannie 3.5's over the 105-00 level looked like it might be hastily jerked away following the FOMC Announcement. On such occasions, it's common to wonder what the following day of trading will look like, and not uncommon to harbor a bit of fear that the losses will continue. But less than 24 hours later, we're right back near the highs of yesterday morning's range. Paradise not lost after all. Thanks go out to lackluster domestic data, a tumbling-Euro-inspired flight to safety into the European close, and who could forget, logic (even if holding under 1.69 in 10yr Treasuries and over 105-00 in Fannie 3.5's is the more optimistic side of logic).
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
Initial Reaction To 10AM Data Positive For Bond Markets, Stocks Fall
10yr yields are down nearly 2 bps since 10am data, primarily due to the weaker Philly Fed Index. It's notable in that last month's report took a big nose dive and historically, such sharp movements see moderation in the other direction the following month. But today's -16.6 is a notable decline on top of May's already notable -5.8.
The other 10am data (LEI, Home Prices, and Existing Sales) are more incidental next to the Philly Fed data, but showed mixed results with sales slightly lower than expected, but prices rising (both in the EHS and FHFA tally). Leading Indicators were stronger than expected, but are merely a collection of mostly backward looking data that markets have already had a chance to digest.
Fannie 3.5's are closing in on 105-00 again and 10yr yields are down to 1.616. Stocks fell about 4 points in the S&P. Weakness in the Euro and falling German Bund yields are also contributing to the domestic Treasury market strength.
ECON: Leading Indicators Rise Slightly Faster Than Expected
The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.3 percent in May to 95.8 (2004 = 100), following a 0.1 percent decline in April, and a 0.2 percent increase in March.
Says Ataman Ozyildirim, economist at The Conference Board: “The LEI rose in May, reversing the slight decline in April. Weakness in the average workweek in manufacturing, stock prices and consumer expectations kept the LEI from rising further. Its six-month growth rate remains in expansionary territory and well above its growth at the end of 2011, pointing to a relatively low risk of a downturn in the second half of 2012.”
Says Ken Goldstein, economist at The Conference Board: “Economic data in general reflect a U.S. economy that is growing modestly, neither losing nor gaining momentum. The result is more of a muddle through. Continued headwinds, both domestic and foreign, make further strengthening of the economy difficult.”
FHFA: House Price Index Up 0.8 Percent in April
U.S. house prices rose 0.8 percent on a seasonally adjusted basis from March to April, according to the Federal Housing Finance Agency’s monthly House Price Index. The previously reported 1.8 percent increase in March was revised downward to reflect a 1.6 percent increase. For the 12 months ending in April, U.S. prices rose 3.0 percent. The U.S.index is 17.6 percent below its April 2007 peak and is roughly the same as the April 2004 index level.
ECON: Philly Fed Index Falls Again, Employment Edges Lower
Firms responding to the June Business
Outlook Survey indicated weaker business
conditions this month. The survey’s
indicators for general activity, new orders,
shipments, and average work
hours were all negative this month, suggesting
overall declines in business. Input
price pressures were less in evidence
this month, with more firms reporting
declines in input prices. And for the second
consecutive month, more firms
reported declines in prices for their
products than reported increases. The
survey’s indicators of future activity remained
positive and improved slightly,
suggesting that the current weakness in
activity is expected to be short‐lived.
Indicators Suggest Decreases
The survey’s broadest measure of
manufacturing conditions, the diffusion
index of current activity, fell from a reading
of ‐5.8 in May to ‐16.6, its second consecutive
negative reading (see Chart 1).
Nearly 40 percent of the firms reported
declines in activity this month, exceeding
the 22 percent that reported increases in
activity. Indexes for new orders and
shipments also showed notable declines,
falling 18 and 20 points, respectively.
Indexes for current unfilled orders and
delivery times both registered negative
readings again this month, suggesting
lower levels of unfilled orders and faster
Firms’ responses suggest steady employment
this month but shorter hours.
The percentage of firms reporting higher
employment (14 percent) edged out
the percentage reporting lower employment
(12 percent). The current employment
index increased 3 points this
month. Firms indicated fewer hours
worked this month: the average workweek
index decreased 14 points and
posted its third consecutive negative
NAR: Existing-Home Sales Constrained by Tight Supply in May, Prices Continue to Gain
Limited supplies of housing inventory held back existing-home sales in May, but sales maintained a strong lead over year-ago levels and home prices are on a sustained uptrend in all regions, according to the National Association of Realtors.
Total existing-home sales1, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, declined 1.5 percent to a seasonally adjusted annual rate of 4.55 million in May from 4.62 million in April, but are 9.6 percent above the 4.15 million-unit pace in May 2011.
Lawrence Yun, NAR chief economist, said inventory shortages in certain areas have been building all year. “The slight pullback in monthly home sales is more likely due to supply constraints rather than softening demand. The normal seasonal upturn in inventory did not occur this spring,” he said. “Even with the monthly decline, home sales have moved markedly higher with 11 consecutive months of gains over the same month a year earlier.”
Freddie Mac: 30-Year Fixed-Rate Mortgage Averages 3.66%
30-year fixed-rate mortgage (FRM) averaged 3.66 percent with an average 0.7 point for the week
ending June 21, 2012, down from last week when it averaged 3.71 percent. Last year at this time, the
30-year FRM averaged 4.50 percent.
15-year FRM this week averaged 2.95 percent with an average 0.6 point, down from last week when
it averaged 2.98 percent. A year ago at this time, the 15-year FRM averaged 3.69 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.77 percent this week,
with an average 0.6 point, down from last week when it averaged 2.80. A year ago, the 5-year ARM
averaged 3.25 percent.
1-year Treasury-indexed ARM averaged 2.74 percent this week with an average 0.5 point, down
from last week when it averaged 2.78 percent. At this time last year, the 1-year ARM averaged 2.99
Bond Markets Well-Contained Overnight, Currently Slightly Stronger
Current levels are close to unchanged from before this morning's Jobless Claims numbers, which themselves, were heading into slightly stronger territory on Euro market weakness.
Stocks and bond yields leaked lower in Asian hours and reversed course, growing more volatile in European hours. But the highs and lows of the overnight and early domestic sessions have been contained inside yesterday's highs and lows. Yields and stock prices peaked just before 7:50am and Treasuries have been very slightly improved since then while stocks move in a more sideways pattern.
Both sides of the market have shown little regard for this morning's tepid Jobless Claims report, instead trading flows and technicals while following European news and market movements. In short, it looks like domestic markets' volition slept-in this morning, opting to wait for the most interesting report of the morning at 10am with Philly Fed.
Fannie 3.5 MBS are currently up 2 ticks on the day at 104-28 and 10yr yields are don just under 1 bp to 1.642. Stock futures are 2 pts above yesterday's 4pm levels in the S&P.
ECON: Jobless Claims 4-Week Average Highest In 6 Months
* Claims 387k vs 380k Consensus, 389k Previous
* 4 Week Moving Average 386.25k vs 382k last time
In the week ending June 16, the advance figure for seasonally adjusted initial claims was 387,000, a decrease of 2,000 from the previous week's revised figure of 389,000. The 4-week moving average was 386,250, an increase of 3,500 from the previous week's revised average of 382,750.
The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending June 9, unchanged from the prior week's unrevised rate.
The advance number for seasonally adjusted insured unemployment during the week ending June 9 was 3,299,000, unchanged from the preceding week's revised level. The 4-week moving average was 3,293,750, an increase of 5,250 from the preceding week's revised average of 3,288,500.
Live Chat Featured Comments
Matthew Graham : "RTRS - PHILADELPHIA FED NEW ORDERS INDEX JUNE -18.8 VS MAY -1.2 "
Matthew Graham : "RTRS - NAR SAYS 25 PCT OF US MAY EXISTING HOME SALES WERE DISTRESSED, LOWEST SINCE RECORDS BEGAN IN 2008 "
Matthew Graham : "RTRS- US MAY NATIONAL MEDIAN PRICE FOR EXISTING HOMES $182,600, HIGHEST SINCE JUNE 2010, +7.9 PCT FROM MAY 2011-NAR "
Andrew Horowitz : "Gm all Philly MFG is really taking a hit lately"
Matthew Graham : "RTRS- US MAY EXISTING HOME SALES -1.5 PCT VS APRIL +3.4 PCT (PREV +3.4 PCT)-NAR "
Matthew Graham : "RTRS - US MAY EXISTING HOME SALES 4.55 MLN UNIT ANNUAL RATE (CONS 4.57 MLN) VS APRIL 4.62 MLN (PREV 4.62 MLN)-NAR "
Matthew Graham : "RTRS- U.S. MAY LEADING ECONOMIC INDICATORS +0.3 PCT (CONSENSUS +0.1 PCT) VS APRIL -0.1 PCT "
Matthew Graham : "RTRS - PHILADELPHIA FED BUSINESS CONDITIONS JUNE -16.6 (CONSENSUS 0.0) VS MAY -5.8 "
Matthew Graham : "RTRS - ECB'S NEW COLLATERAL RULES REFER MAINLY TO MORTGAGE-BACKED SECURITIES -GERMAN PAPER CITING SOURCES "
Matthew Graham : "RTRS - ECB HAS DECIDED TO SIGNIFICANTLY LOOSEN ITS COLLATERAL RULES -MEDIA, CITING SOURCES "
Matthew Graham : "reminds me of when I threw out my bathroom scale because I didn't like what it was telling me. "
Victor Burek : "i too am not gonna let experian, transunion or experian rate my credit..i am gonna rate my own credit worthiness"
Matthew Graham : "I reject your reality and substitute my own!"
Matthew Graham : "RTRS- ECB DISCUSSING MEDIUM TERM PLANS TO MAKE OWN ASSESSMENT OF SOVEREIGN BONDS RATHER THAN USE RATING AGENCIES - SOURCES "
Matthew Graham : "RTRS - GREEK GOVERNMENT SAYS REVISING BAILOUT WILL NOT PUT IN DOUBT THE OBJECTIVE OF CONTROLLING DEBT, STRUCTURAL REFORMS, BALANCED BUDGET "
Matthew Graham : "RTRS - THE GOAL OF GREEK GOVERNMENT IS TO REVISE BAILOUT TERMS WITHOUT RISKING EURO MEMBERSHIP - GREEK GOVERNMENT DOCUMENT "
Victor Burek : "but i like our chances"
Victor Burek : "depend on philly fed"
Tony Cardinal : "Vb o/u on 105 on the 3.5 by days end?"
Ira Selwin : "I see what they did there"
Patrick Waldron : "Of course not! They "fell" from 389 Ira. "
Victor Burek : "revised higher to 389, so fell to 387"
Ira Selwin : "So Jobless claims they rose from 386 - > 387"
Matthew Graham : "RTRS- US JOBLESS CLAIMS 4-WK AVG HIGHEST SINCE WEEK ENDED DEC 3, 2011 "
Matthew Graham : "RTRS - US CONTINUED CLAIMS UNCHANGED AT 3.299 MLN (CON. 3.275 MLN) JUNE 9 WEEK FROM 3.299 MLN PRIOR WEEK (PREV 3.278 MLN) "
Matthew Graham : "RTRS- US JOBLESS CLAIMS 4-WK AVG ROSE TO 386,250 JUNE 16 WEEK FROM 382,750 PRIOR WEEK (PREVIOUS 382,000) "
Matthew Graham : "RTRS - US JOBLESS CLAIMS FELL TO 387,000 JUNE 16 WEEK (CONSENSUS 380,000) FROM 389,000 PRIOR WEEK (PREVIOUS 386,000) "
Victor Burek : "yes..and Italy to come"
Joe Prine : "VB spain, greece...etc?"
Victor Burek : "joe..more the global economic issues that will drive rates lower..twist will help"
Patrick Waldron : "Can we change "klaatu barada nikto" to "Lockhart, Bernanke, Liz Duke"?"
Joe Prine : "GM all. anyone think the Twist buying will drive rates lower?"
Patrick Waldron : "Wow. Nice Evil Dead reference MG!"