10yr yields made it as high as 1.857 overnight, but began bouncing back lower just after 2am, finally making it to the domestic open at marginally improved levels. Similarly MBS opened up in positive territory and made some decent gains with Treasuries into the Fed "Twist" buyback. Economic data was largely ignored, as has been the case with everything but Retail Sales earlier in the week. Weakness began creeping in as the Fed Buyback commenced at 10:15am and we're seeing some volatile swings in the immediate wake (buyback finished at 11:00am).
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
MBS 7/32nds Off Highs In The Past 30 Minutes
Big "risk-on" swing relative to the day's previous volume. Candidates for causality include a double bottom in German Bund yields as a positive trend (mentioned this morning re: Elliott Wave) matured. Bunds hit 1.516 two noticeable times and are now up to 1.536. Domestic Treasuries have followed the bounce, moving up from 1.79 to 1.81 and Fannie 3.0s have sold off rather abruptly from 102-13 to 102-06 currently.
All of the above coincides with a bounce higher in stocks and a failure to break convincingly through the 1.80 pivot in 10yr yields. Please note the continued dominance of TECHNICALS and TRADEFLOWS.... In other words, we had a markedly WEAKER Philly Fed survey with an extra weak employment component. Markets didn't care. Can't rationalize the moves, can only observe and react.
Speaking of reacting, negative reprices are a risk now, considering how MBS hit their highs just during rate sheet time and are now back to their lows of the morning. The 'bond rally nazi" is alive and well (for now): "No Rally For You!" Man... we hate that guy, but he doesn't seem to want to go away this week.
ECON: Philly Fed Index Lower Than Expected, Employment Lowest Since '09
* Business Conditions -7.1 vs -5.0 consensus
* New Orders -5.5 vs July -6.9
* Employment -8.6 vs July 8.4
* Employment lowest since Sept 2009
Manufacturing firms responding to the Business Outlook Survey continued to report weakness in overall business conditions in August. The survey’s diffusion index of current activity increased to -7.1 from a reading of -12.9 in July, marking the fourth consecutive negative reading for the index but also its highest reading since May.
The index for new orders also improved from July but remained negative this month. Firms reported declines in shipments and fewer hours worked this month. The survey’s indicators of activity over the next six months remained positive but moderated for the second consecutive month.
In the special questions this month, firms were asked about the importance of seasonal factors to monthly production levels. They were also asked about scheduled shutdowns and production slowdowns during the summer months.
Freddie Mac: Fixed Mortgage Rates Higher for Third Consecutive Week
-30-year fixed-rate mortgage (FRM) averaged 3.62 percent with an average 0.6 point for the week
ending August 16, 2012, up from last week when it averaged 3.59 percent. Last year at this time, the
30-year FRM averaged 4.15 percent.
-15-year FRM this week averaged 2.88 percent with an average 0.6 point, up from last week when it
averaged 2.84 percent. A year ago at this time, the 15-year FRM averaged 3.36 percent.
-5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.76 percent this week
with an average 0.6 point, down from last week when it averaged 2.77 percent. A year ago, the 5-year
ARM averaged 3.08 percent.
-1-year Treasury-indexed ARM averaged 2.69 percent this week with an average 0.4 point, up from
last week when it averaged 2.65 percent. At this time last year, the 1-year ARM averaged 2.86
Bond Markets Cautiously Adding To Gains Since Midnight
The overnight session saw better-than-average volume, which, considering the time of year, was actually quite high. Asia aggressively sold bonds at the open, but 10yr yields bounced in the wee hours before hitting 1.86%. That technical bounce trumped better-than-expected UK Retail Sales and ushered US 10yr yields into the New York session just slightly better than unchanged.
The morning data (weaker claims, but basically on-the screws, weaker housing starts, stronger building permits) is best seen as simply "not standing in the way of the technical correction.
That correction began with the German Bond market open and German Bunds traded in miniature Elliott Wave that's maturing presently. Incidentally, it's doing do right at yesterday's important pivot for Bunds at 1.52. This translates to the 1.80 pivot in US 10's.
MBS similarly opened slightly stronger and have ratcheted incrementally higher as the morning progresses. Fannie 3.0's are up 8 ticks at 102-10 and Fannie 3.5's are up 6 ticks at 104-24.
ECON: Housing Starts Fall Despite Strong Multi-Family. Permits Surge
* Housing Starts - 1.1 percent vs +6.8 percent in June
* Housing Starts 746k annual rate vs 757k consensus
* Permits +6.8 percent vs -3.1 percent June
* Permits 812k vs 770k consensus
* Multi-Family starts up 12.4 percent, SFRs -6.5 percent
* SFR permits highest since March 2010
The U.S. Census Bureau and the Department of Housing and Urban Development jointly announced the following new residential
construction statistics for July 2012:
Privately-owned housing units authorized by building permits in July were at a seasonally adjusted annual rate of 812,000. This is 6.8
percent (±1.5%) above the revised June rate of 760,000 and is 29.5 percent (±1.6%) above the July 2011 estimate of 627,000.
Single-family authorizations in July were at a rate of 513,000; this is 4.5 percent (±0.8%) above the revised June figure of 491,000.
Authorizations of units in buildings with five units or more were at a rate of 274,000 in July.
Privately-owned housing starts in July were at a seasonally adjusted annual rate of 746,000. This is 1.1 percent (±9.6%)* below the
revised June estimate of 754,000, but is 21.5 percent (±14.2%) above the July 2011 rate of 614,000.
Single-family housing starts in July were at a rate of 502,000; this is 6.5 percent (±8.7%)* below the revised June figure of 537,000.
The July rate for units in buildings with five units or more was 229,000.
ECON: Jobless Claims Slightly Higher Than Expected
* Claims 366k vs 365k Consensus, 364k Previous
* Continued Claims 3.305 mln vs 3.300 mln
In the week ending August 11, the advance figure for seasonally adjusted initial claims was 366,000, an increase of 2,000 from the previous week's revised figure of 364,000. The 4-week moving average was 363,750, a decrease of 5,500 from the previous week's revised average of 369,250.
The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending August 4, unchanged from the prior week's unrevised rate.
The advance number for seasonally adjusted insured unemployment during the week ending August 4, was 3,305,000, a decrease of 31,000 from the preceding week's revised level of 3,336,000. The 4-week moving average was 3,303,000, a decrease of 3,000 from the preceding week's revised average of 3,306,000.
Live Chat Featured Comments
Victor Burek : "get rid of fannie/freddie"
Matt Hodges : "haven't read the story - is the argument higher rates?"
Andy Pada : "wondering how many mortgage professionals will vote against their professional/work interests"
Andy Pada : "So to stir the pot a bit, Romney-Ryan doesn't seem to be a positive for our mortgage industry based on the Google News article in the news stream"
rford : "REPRICE: 10:19 AM - Wells Fargo Better"
Matthew Graham : "ok AP... re: 1.80. The more we trade around and under it, the more it will look like a long term pivot with the lower end of the lat 2011/early2012 range"
Christopher Stevens : "from Sept '11 to Mmid May '12 we danced on the 10YR 1.80 line. We broke through in May and have not been near it until the last few days. I would think if we could hold the 1.80 and not break back abobe for a prolonged period we are in good shape."
Matt Hodges : "Fannie/Freddie/HUD guides require net rental loss to go on liabilities, while net profit go into income. It seems there is an exception, allowing net loss to flow into income. Can anyone assist?"
Andy Pada : "MG, do we have any technicals working in our favor if the 10 stays below 1.79?"
Matthew Graham : "RTRS- PHILADELPHIA FED EMPLOYMENT INDEX AUGUST -8.6 VS JULY -8.4 "
Matthew Graham : "RTRS- PHILADELPHIA FED NEW ORDERS INDEX AUGUST -5.5 VS JULY -6.9 "
Matthew Graham : "RTRS- PHILADELPHIA FED SIX-MONTH BUSINESS CONDITIONS AUGUST 12.5 VS JULY 19.3 "
Matthew Graham : "RTRS- PHILADELPHIA FED BUSINESS CONDITIONS AUGUST -7.1 (CONSENSUS -5.0) VS JULY -12.9 "
Ira Selwin : "First rate sheet this am was minimially different than yesterdays opening sheet"
Mike Drews : "we're right about in line with yesterday morning"
Matthew Graham : "RTRS - US JULY SINGLE-FAMILY PERMITS 513,000 UNIT RATE, HIGHEST SINCE MARCH 2010 "
Matthew Graham : "RTRS- US JULY SINGLE-FAMILY STARTS -6.5 PCT TO 502,000 UNIT RATE; MULTIFAMILY +12.4 PCT TO 244,000 UNIT RATE "
Matthew Graham : "RTRS- US JULY HOUSING PERMITS 812,000 UNIT RATE, HIGHEST SINCE AUG 2008, (CONSENSUS 770,000) VS JUNE 760,000 UNIT RATE (PREV 760,000) "
Matthew Graham : "RTRS- US JULY HOUSING PERMITS +6.8 PCT VS JUNE -3.1 PCT (PREV -3.1 PCT) "
Matthew Graham : "RTRS - US JULY HOUSING STARTS 746,000 UNIT RATE (CONSENSUS 757,000) VS JUNE 754,000 (PREV 760,000) "
Matthew Graham : "RTRS- US JULY HOUSING STARTS -1.1 PCT VS JUNE +6.8 PCT (PREV +6.9 PCT) "
Matthew Graham : "RTRS- US CONTINUED CLAIMS FELL TO 3.305 MLN (CONS. 3.300 MLN) AUG 4 WEEK FROM 3.336 MLN PRIOR WEEK (PREV 3.332 MLN) "
Matthew Graham : "RTRS- US JOBLESS CLAIMS 4-WK AVG FELL TO 363,750 AUG 11 WEEK, LOWEST SINCE MARCH 31 WEEK, FROM 369,250 PRIOR WEEK (PREVIOUS 368,250) "
Matthew Graham : "RTRS - US JOBLESS CLAIMS ROSE TO 366,000 AUG 11 WEEK (CONSENSUS 365,000) FROM 364,000 PRIOR WEEK (PREVIOUS 361,000) "
Andy Pada : "just waiting for 8:30 data"
Andy Pada : "anyone read the news stream article: Will Mitt Follow Ryan on Housing?"
Oliver S. Orlicki : "IS that green I see? Forgot what it looked like."
John Rodgers : "That is a strange color on my screen. I remember that color from my box of 64 crayons but can't think of the name. "
Steven Stone : "Merkel ends her summer vacation to oversee a Cabinet meeting Aug. 15 before departing for a two-day trip to Canada for talks with Prime Minister Stephen Harper as the spiraling crisis threatens the global economy.
Read more: http://www.businessinsider.com/angela-merkel-ends-her-vacation-this-week-and-there-are-problems-everywhere-to-deal-with-2012-8#ixzz23hyCCntg"