Today is a very simple and very negative day for bond markets. The bottom line is that between Euro headlines and a freakishly strong Housing Starts report, stocks and bonds have hooked up in a unified "risk on" movement. Price changes are flashing much more quickly on the MBS Live Dashboard today, connoting a marked increase in trading activity in Treasuries and MBS. That's somewhat disconcerting heading into tomorrow's EU Summit, and indeed, some anticipation for flowery, jovial headlines tomorrow could also be fueling today's trading momentum (sort of like the "lead off" concept we frequently discuss). With the benefit of Fed buying providing constant support for MBS, we're outperforming Treasuries quite well, but that outperformance simply means that MBS are "less bad" than Treasuries at the moment. We're still in negative territory to the tune of roughly a quarter point, and the 2-days trends look ominous heading into tomorrow.
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 11:07 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 Back Near Weaker Levels Of The Morning
A heads up that MBS are back in their weaker territory of the morning as 10yr yields push 1.80 and stocks erase earlier losses.
Fannie 3.0s are down 8 ticks on the day at 104-19, and this could be reprice risk territory for some lenders who priced at the highs just before 10am. It would probably take more prolonged weakness or additional weakness before more lenders were at risk of repricing, but we'd remain defensive here just the same.
Bond Markets Off Weakest Levels After Stronger Housing Starts Data
We didn't expect much guidance from the Housing Starts data this morning, but it sent a clear shockwave through markets, eliciting the steepest 30 minutes of selling since NFP morning on 10/5.
Bond markets were weaker overnight after Moody's reaffirmed Spain's sovereign debt rating. Spanish bonds rallied significantly vs German benchmarks and when the European periphery rallies vs the core, it's generally coinciding with selling pressure on safe-haven complements such as US Treasuries.
But when we take a step back to look at this morning's movements in the context of the past several sessions, it looks more like the steep sell-off is a two-day event that began yesterday. Against that backdrop, this morning's post-Housing Starts spike joins the broad weakness overnight to merely end up as more of an abrupt move weaker inside a range.
MBS and Treasuries have bounced off their weakest levels so far this morning, but said levels were the worst in several weeks. Fannie 3.0s were down to 104-17 earlier and have since clawed back to 104-23, only 4 ticks down on the day. 10yr yields were as high as 1.781 but are back to 1.764.
The swing back in the other direction is being helped along by a sharp moved lower in stocks after the cash open. In fact, stocks have sold faster in the past 10 minutes than they rallied in the 10 minutes following Housing Starts. That said, Stocks ALSO look to be making moves that are merely spiky in the short term, but in line with longer term trends.
ECON: Housing Starts Demolish Expectations, Highest Since Mid 2008
- Starts up 15 pct to 872k vs 770k consensus
- Permits up 11.6pct to 894k vs 810k consensus
- Starts and Permits highest since summer of 2008
Privately-owned housing units authorized by building permits in September were at a seasonally adjusted annual rate of 894,000. This
is 11.6 percent (±1.1%) above the revised August rate of 801,000 and is 45.1 percent (±1.8%) above the September 2011 estimate of
Single-family authorizations in September were at a rate of 545,000; this is 6.7 percent (±0.9%) above the revised August figure of
511,000. Authorizations of units in buildings with five units or more were at a rate of 323,000 in September.
Privately-owned housing starts in September were at a seasonally adjusted annual rate of 872,000. This is 15.0 percent (±12.1%) above
the revised August estimate of 758,000 and is 34.8 percent (±18.2%) above the September 2011 rate of 647,000.
Single-family housing starts in September were at a rate of 603,000; this is 11.0 percent (±11.1%)* above the revised August figure of
543,000. The September rate for units in buildings with five units or more was 260,000.
Privately-owned housing completions in September were at a seasonally adjusted annual rate of 683,000. This is 0.4 percent (±11.2%)*
above the revised August estimate of 680,000 and is 13.8 percent (±16.2%)* above the September 2011 rate of 600,000.
Single-family housing completions in September were at a rate of 524,000; this is 8.5 percent (±15.4%)* above the revised August rate
of 483,000. The September rate for units in buildings with five units or more was 145,000.
Live Chat Featured Comments
Victor Burek : "seems Fed is buying early this morning"
Matthew Graham : "RTRS - US SEPT SINGLE-FAMILY STARTS RATE HIGHEST SINCE AUG 2008; PERMITS HIGHEST SINCE JULY 2008 "
Matthew Graham : "RTRS- US SEPT HOUSING STARTS 872,000 UNIT RATE (CONSENSUS 770,000) VS AUG 758,000 (PREV 750,000) "
Matthew Graham : "RTRS- US SEPT HOUSING STARTS +15.0 PCT VS AUG +4.1 PCT (PREV +2.3 PCT) "
Victor Burek : "wow..huge beat on starts"
Adam Quinones : "range bound Orlicki"
Oliver S. Orlicki : "Need to stop this bleeding"