MBS Live: MBS Afternoon Market Summary
One day before July Fannie/Freddie 30yr Fixed MBS are retired, production coupons hit new all time highs about an hour ago as Fannie 3.5's made it to 105-30 and Fannie 3.0's to 103-19. The session overall was exceedingly boring and very much lacking volatility and volume. No new news came out of today's Eurogroup meeting and apart from some Fed-speak from Williams that continued to hearken the QE3 possibilities--not to mention specific MBS involvement--things were relatively lifeless despite the bond market gains. We see those more as "incidental" ahead of an auction cycle and FOMC minutes later 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.
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Afternoon 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 afternoon.
3:15PM :
ECON: Consumer Credit Rises Faster Than Expected In May
Overall Consumer Credit grew by $17.12 bln in May vs a revised $9.95 bln in April. The gain was the largest in five months and well above the Markets' expectations of $8.5 bln.
Revolving credit led the charge rising 11.2 % although non-revolving credit also grew, just at a slower pace of 6.5%. Revolving credit accounted for $870.2 bln of the total outstanding while non-revolving accounted for $1702.6 bln.
Any discernible market reaction occurred briefly, and mainly in equities. After a brief pop of volume in Treasuries, bond markets continue on at similar levels to before the report. This is usually the case for Consumer Credit releases and indeed for most economic reports that cover time periods more than a month into the past--veritable ancient history in the present economy.
Revolving credit led the charge rising 11.2 % although non-revolving credit also grew, just at a slower pace of 6.5%. Revolving credit accounted for $870.2 bln of the total outstanding while non-revolving accounted for $1702.6 bln.
Any discernible market reaction occurred briefly, and mainly in equities. After a brief pop of volume in Treasuries, bond markets continue on at similar levels to before the report. This is usually the case for Consumer Credit releases and indeed for most economic reports that cover time periods more than a month into the past--veritable ancient history in the present economy.
12:08PM :
ALERT ISSUED:
MBS Testing New All-Time Highs After Comments From Fed's Williams
The fed stands ready for QE3. This has been the message from 3 out of 3 Fed speakers so far today. Echoing similar sentiments from Rosengren and Evans, San Francisco Fed President John Williams further clarified the standard-issue "stands ready" verbiage, adding
“If further action is called for, the most effective tool would be additional purchases of longer-maturity securities, including agency mortgage-backed securities."
Despite the assertion that the Fed is ready to act, Williams noted that the Fed is currently falling short on both its mandates and that the recent extension of Operation Twist will have a "relatively modest impact."
Of particular interest in this speech is the extent to which Williams leaned on Europe as major consideration for the domestic economy. On the one hand, he noted that Europe is the "most important wild card for the US Economy," but also said that the European crisis is spreading, and cannot be solved by fiscal austerity.
This seems to us like an explicit statement that "things are bad" and getting worse, with the only slightly less explicit conclusion of Fed QE3 as the next logical step for the domestic economy.
Bond markets improved slightly on the release of the speech and MBS peeked into new all-time highs for a few trades and are currently in line with Friday's highs of 103-16 in Fannie 3.0s. 10yr yields have broken through overnight lows at 1.513 and are currently at 1.512.
Some of the "early crowd" may consider a positive reprice here, but we'd generally expect more muted responses to gains on the day before the Class A roll.
“If further action is called for, the most effective tool would be additional purchases of longer-maturity securities, including agency mortgage-backed securities."
Despite the assertion that the Fed is ready to act, Williams noted that the Fed is currently falling short on both its mandates and that the recent extension of Operation Twist will have a "relatively modest impact."
Of particular interest in this speech is the extent to which Williams leaned on Europe as major consideration for the domestic economy. On the one hand, he noted that Europe is the "most important wild card for the US Economy," but also said that the European crisis is spreading, and cannot be solved by fiscal austerity.
This seems to us like an explicit statement that "things are bad" and getting worse, with the only slightly less explicit conclusion of Fed QE3 as the next logical step for the domestic economy.
Bond markets improved slightly on the release of the speech and MBS peeked into new all-time highs for a few trades and are currently in line with Friday's highs of 103-16 in Fannie 3.0s. 10yr yields have broken through overnight lows at 1.513 and are currently at 1.512.
Some of the "early crowd" may consider a positive reprice here, but we'd generally expect more muted responses to gains on the day before the Class A roll.
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.
Matthew Graham : "RTRS- U.S. MAY NON-REVOLVING CREDIT UP $9.10 BLN VS REVISED $13.49 BLN INCREASE IN APRIL "
Matthew Graham : "RTRS - U.S. MAY REVOLVING CREDIT UP $8.01 BLN, LARGEST MONTHLY INCREASE SINCE NOV 2007, VS REVISED DECREASE OF $3.54 BLN IN APRIL"
Matthew Graham : "RTRS- U.S. MAY CONSUMER CREDIT UP $17.12 BLN VS REVISED $9.95 BLN INCREASE IN APRIL "
Michael Francis : "I would agree MM007, but this is Obama's administration, and a a congress and senate that seem to do things wrong on a regular basis...."
MortgageMan007 : "it would have to be basis imo...otherwise that's not profit"
Michael Francis : "I believe it is basis. You should have your tax accountant give you the details. They should have it down by now...."
Andy Pada : "I'm more interested on whether profit is based on basis v. mortgage amount (which seems to be a very interesting twist)."
Michael Francis : "It is the secret "tax' placed within Obama-Care, and i believe it starts at the time it was intended, regardless of the SCOTUS decision. I have not found the timing to be a 100% fact, but I believe it flies no matter the SCOTUS decision."
Rob Clark : "REPRICE: 12:46 PM - Provident Funding Better"
Ken Crute : "i believe it did, but rarely applies so I did not dig that deep into it "
Brent Borcherding : "Yes, but it is part of the ACA so the SCOTUS decision should put in effect in 2 years, no?"
Ken Crute : "that popped up a few years back "
Brent Borcherding : "I'll say it, again, though...I'm not sure of the accuracy of this though I haven't seen anything saying it is false."
Brent Borcherding : "The example I saw was a couple selling their primary residence and downsizing, yes."
Brent Borcherding : "If you are single and earn over $250K you pay it on anything over $250K "profit" not the higher adjusted profit of $500K for couples."
Andy Pada : "primary residence? and profit is based on mortgage amount and not basis (purchase price)."
Brent Borcherding : "I can't, AP and I can't determine whether it is propoganda or not. It goes something like this, though. If you are a household who makes over $250K a year and you were to sell a home for $1M, you owed $200K then you will pay 3.8% tax on everything you were to clear over $500K...in this scenario 3.8% on $300K, $11k-ish."
Andy Pada : "can you explain, Brent?"
Brent Borcherding : "Hey, anyone fully understand this coming federal home sales tax on earners of greater than $250K a year on a "profit" of greater than $500K as part of the Affordable Care Act?"
Matthew Graham : "RTRS- WILLIAMS-EXTENSION OF OPERATION TWIST WILL HAVE RELATIVELY MODEST IMPACT ON ECONOMY "
Matthew Graham : "RTRS - WILLIAMS - IF EUROPE'S CRISIS ESCALATES MORE THAN EXPECTED, U.S. ECONOMY 'COULD BE SEVERELY DAMAGED'"
Matthew Graham : "RTRS - WILLIAMS - EUROPE, 'MOST IMPORTANT WILD CARD FOR THE U.S. ECONOMY,' REMAINS VULNERABLE TO SHOCKS "
Matthew Graham : "RTRS - WILLIAMS - FISCAL AUSTERITY CAN'T SOLVE EUROPE'S CRISIS, WHICH IS SPREADING "
Matthew Graham : "RTRS- WILLIAMS - FEDERAL BUDGET BELT TIGHTENING WILL WEIGH ON GROWTH NEXT YEAR, UNCERTAINTY ALREADY COSTING JOBS "
Matthew Graham : "RTRS - WILLIAMS - NEW BOND BUYS, INCLUDING MORTGAGE-BACKED SECURITIES, MOST EFFECTIVE TOOL IF FURTHER ACTION NEEDED"
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