MBS and Treasuries are thus far doing an admirable job of holding their ground against what has been the most aggressive day of weakness since early July. Keep in mind that July has been characterized by narrow ranges and small movements day to day. The only exception to that rule was a jump higher between the 20th and 23rd, and now today looks like it may simply be a return to the previous trajectory (one that is still positive). Thus far, 10yr yields are holding under an important ceiling at 1.523 and Fannie 3.0 MBS have avoided breaking below an important technical level at 103-16. In the grand scheme though, they could fall to 103-06 and STILL not have broken out of the long tern trend channel existing since March/April. Whatever happens today is likely to be trumped by next week's FOMC, so we're sort of observing trading in a vacuum in that sense. Float it out if you can, but guard against weakness if 3.0's make another meaningful run at 103-16. It's a good day to be tuned in to real time pricing.
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 11:09 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
Sell-Off Accelerating. Negative Reprice Risk For Lenders Out With Rates
Fannie 3.0's are now down to the first major technical support level stretching back to early July at 103-19. Things would get slightly more serious with a break of 103-16 and very serious at 103-10. Then FOMC next week could change all of that. Good times...
10yr yields are back up over 1.50, currently 1.5207 with support overhead at 1.5268. If you already had rate sheets from a particular lender, there's a risk of negative reprices as long as these levels persist.
ECON: Consumer Sentiment Falls to 2012 Low in July
(Reuters) - Consumer sentiment fizzled in July, falling to its lowest level of the year so far as Americans took a dim view of their job and income prospects, a survey released on Friday showed.
The Thomson Reuters/University of Michigan's final reading on the overall index on consumer sentiment fell to 72.3 from 73.2 in June. It the second month in a row attitudes have cooled and the lowest level since December.
That was a touch higher than economists' expectations for it to hold steady with July's preliminary reading of 72.
"While consumers do not anticipate an economy-wide recessionary decline, they do not expect a pace of economic growth that could satisfactorily revive job and income prospects," survey director Richard Curtin said in a statement.
Bond Markets Weaker Overnight, Fighting Further Weakness This AM
One day after European Central Bank President Mario Draghi said that the ECB will do "whatever is necessary to preserve the Euro, and believe me, it will be enough," his claims seem to be put to the test. Draghi's assertion closely followed a speech from ECB's Nowotny, in which he suggested that Europe's permanent bailout fund, the ESM, could be given a banking license, thus allowing it to borrow money directly from the ECB in order to bring down the financing costs of Spain and Italy.
In the overnight session, the Bundesbank (Germany's central bank) spoke out in stern opposition to such ideas, saying that a banking license for bailout funds would be "de facto financing of governments, that would be fatal, and prohibited by European treaties." However in the same breath, they noted that it would be less problematic for the EFSF to buy bonds than for the ECB to do so, leaving the door open to the concept a central Euro zone entity subsidizing the borrowing costs of troubled states.
While direct intervention may fall only in the realm of the EFSF on paper, the ECB has purchased the bonds of troubled states in open market operations in the past and news that it could happen again greatly counteracted the Bundesbank's statements. Le Monde, a French paper, quoted "sources" as saying that Merkel and Hollande would discuss a plan for ECB bond buying today. We've since seen wires from the conversation, but nothing definitive.
Bottom line, risk markets shifted in a slightly optimistic direction on yesterday's Draghi speech and now the Le Monde story gives it some teeth, yet the world waits for better confirmation. In the meantime, an as-expected GDP print has essentially allowed the momentum from overnight trading to continue. It was clear that domestic bond markets were setting up to use the GDP print as a staging area to push back against the sell-off, but they didn't get a weak enough result to do so.
Thus we find production MBS about 7 ticks weaker so far this morning at 103-25 in Fannie 3.0's. A break below 103-20 would constitute a 'test' of the long-standing uptrend, but one that would require confirmation next week, and next week is FOMC, so today's volatility is relatively moot. Next up is Consumer Sentiment as the last piece of economic data this week. We're also still on guard for any additional Merkal/Hollande headlines.
ECON: US GDP Rises +1.5 Percent, As Expected
- headline +1.5 vs +1.5 consensus, +2.0 previous
- Final Sales +1.2 vs +1.4 consensus, +2.4 previous
- Consumer Spending +1.5 pct vs +2.4 previous, smallest rise since 2011
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 1.5 percent in the second quarter of 2012,
(that is, from the first quarter to the second quarter), according to the "advance" estimate released by the
Bureau of Economic Analysis. In the first quarter, real GDP increased 2.0 percent.
The increase in real GDP in the second quarter primarily reflected positive contributions from
personal consumption expenditures (PCE), exports, nonresidential fixed investment, private inventory
investment, and residential fixed investment that were partly offset by a negative contribution from state
and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.
Live Chat Featured Comments
Mike Drews : "everybody pull up your advanced charts and gain some perspective "
Victor Burek : "its friday, people taking profits...outlook is still the same"
Joe Probst : "Its about to get faster if we keep falling though"
Ken Crute : "can't have 3.5 rates and same day approvals "
Joe Probst : "my turn time is really bad too"
Victor Burek : "turn times are little slower"
SMTM : "AD that is everywhere right now"
Adam Dahill : "Am I the only one suffering horrible turntimes? How can you lock at app and close in time? I guess it's my market with the condos and coops, cemas etc.."
Victor Burek : "i respectively disagree...i am a member of this site to help my clients determine the best time to lock"
Michael Owens : "agree with Kopec. safe vs sorry"
Chris Kopec : "Regarding rates....lock, process, close. Anyone floating is floating at their discretion, not mine. Too busy to play mind reader."
Matthew Graham : "RTRS- U.S. HOMEOWNER VACANCY RATE FALLS TO 2.1 PERCENT IN SECOND QUARTER FROM 2.2 PERCENT IN FIRST QUARTER; RENTAL VACANCY RATE FALLS TO 8.6 PERCENT FROM 8.8 PERCENT "
Matthew Graham : "RTRS- U.S. HOMEOWNERSHIP RATE RISES TO 65.5 PERCENT IN SECOND QUARTER FROM 65.4 PERCENT IN FIRST QUARTER - U.S. COMMERCE DEPARTMENT "
Matt Hodges : "auto sub in VA will allow, but i don't think you can get a 45+ through"
Brent Borcherding : "US Bank 2nds go off of the LP approval"
Ken Crute : "possibly, but will the 2nd allow it? "
Mike Drews : "anyone know?...can you go over 45dti on an 79ltv89cltv purchase through LP?"
Matthew Graham : "THOMSON REUTERS/U. OF MICH CURRENT CONDITIONS INDEX FINAL JULY 82.7 (CONSENSUS 83.0) VS PRELIMINARY JULY 83.2 "
Matthew Graham : "RTRS- THOMSON REUTERS/U. OF MICH US CONSUMER SENTIMENT FINAL JULY 72.3 (CONSENSUS 72.0) VS PRELIMINARY JULY 72.0 "
Adam Quinones : "almost $2bn already!"
Adam Quinones : "well...lots of folks are locking right now!"
Jason Adams : "Friday is a day for golfing , not locking"
Brent Borcherding : "You may consider locking later today once we get reprices for the better."
Matt Hodges : "smart move locking before a Friday, Dudek"
Justin Dudek : "yeah i had a 340k streamer on the fences forever, and i had to practically strong arm the guy into locking yest. "
Steven Stone : ""we are going to do everything we can" doesnt really mean much if you arent allowed to do anything"
Matthew Graham : "yeah and then a French paper reported that Hollande and Merkel would announce it today"
Matt Hodges : "illegal, i believe i heard this morning"
Victor Burek : "BUNDESBANK SAYS IT HASN’T CHANGED STANCE ON ECB BOND BUYING, REMAINS OPPOSED TO FURTHER BOND BUYING BY THE ECB"
Victor Burek : "didnt german finance guy already say bond buying not gonna happen"
Matthew Graham : "and we may not even get close to either of those until next week. If Hollande and Merkel don't say something about ECB Bond Buying real darn quick..."
Matthew Graham : "similar technical level for 10yr yields is around 1.54 today"
Ken Crute : "Justin your net escrow question: would be investor not FHA "
Matthew Graham : "which would be another 10 tick drop, today"
Matthew Graham : "we haven't even corrected to the lower end of the trend channel"
Victor Burek : "be back over 104 and 106 next week..probalby monday"
Matthew Graham : "this is nothing. pull up the advanced chart and look at the trend going back to April"
Victor Burek : "only temp losses"
Justin Dudek : "for the atm comment, it was more rhetorical. it seems like its so fattened up by increased fed buying, and in 2 days we lose 12 ticks on a sneeze "
Matthew Graham : "RTRS - MERKEL AND HOLLANDE SAYS KEY DECISIONS OF LAST EU SUMMIT MUST BE IMPLEMENTED QUICKLY "
Matthew Graham : "RTRS - MERKEL AND HOLLANDE SAY AFTER PHONE CALL THEY DETERMINED TO DO ALL THEY CAN TO SAFEGUARD THE EURO "
Justin Dudek : "real question though. are net escrows prohibited by fha, or just investor overlay? "
Matthew Graham : "could you be more specific? Not sure I follow..."
Justin Dudek : "is mbs turning into the fed's personal atm?"
Matthew Graham : "RTRS- US 2010 GDP REVISED TO +2.4 PCT FROM +3.0 PCT "
Victor Burek : "only temporary move oliver"
Matthew Graham : "RTRS - US 2011 GDP GROWTH REVISED TO +1.8 PCT FROM +1.7 PCT; CORE PCE PRICE INDEX UNREVISED AT +1.4 PCT "
Matthew Graham : "RTRS- US Q2 CONSUMER SPENDING RISE SMALLEST SINCE Q2 2011 (+1.0 PCT); Q2 PCE PRICE INDEX RISE SMALLEST SINCE Q2 2010 (+0.6 PCT) "
Matthew Graham : "RTRS - US Q2 EXPORTS +5.3 PCT (Q1 +4.4 PCT), IMPORTS +6.0 PCT (Q1 +3.1 PCT) "
Matthew Graham : "RTRS- US ADVANCE Q2 GDP DEFLATOR +1.5 PCT (CONS +1.6 PCT), Q1 +2.2 PCT "