MBS Live: MBS Morning Market Summary
MBS and Treasuries rallied overnight and have continued to hold their ground at those stronger levels in the AM hours.  There are several places one can look in an attempt to chalk up the rally to some event or phenomenon, but quite simply, it looks like markets were collectively trading with a "risk-on" mentality and the past three sessions have offered a "risk-off" counterpoint.  Such instances can be the beginnings of a reversal or mere consolidations before continuing to weaken.  With no data or events to provide guidance, we'd continue to err on the side of defensive until after tomorrow's FOMC Announcement proves that it is truly the non-event that most market participants expect it to be.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
104-23 : +0-11
FNMA 3.5
106-11 : +0-06
FNMA 4.0
107-00 : +0-03
FNMA 4.5
107-27 : +0-00
GNMA 3.0
106-04 : +0-10
GNMA 3.5
108-15 : +0-05
GNMA 4.0
109-05 : +0-02
GNMA 4.5
108-24 : +0-01
104-17 : +0-11
106-04 : +0-06
106-19 : +0-03
107-05 : +0-00
Pricing as of 11:08 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 this morning.

10:12AM  :  ECON: Richmond Fed Manufacturing Weaker In October
Manufacturing activity in the central Atlantic region pulled back in October after improving somewhat last month, according to the Richmond Fed's latest survey. The seasonally adjusted index of overall activity was pushed lower as all broad indicators of activity — shipments, new orders and employment — were in negative territory. Other indicators also suggested additional softness. Capacity utilization turned negative, while backlogs remained negative but improved from its September reading. Moreover, the gauge for delivery times changed little, while raw materials inventories grew at a slightly quicker pace, and growth in finished goods edged lower.
9:56AM  :  ALERT ISSUED: Bond Markets Holding Ground After Opening In Better Territory
MBS are just a few ticks off their highs of the morning after rallying nicely to start the day. It now looks like bond markets are in the final stages of a brief consolidation that began last Wednesday. This has taken shape in much the same way as the consolidation in mid August where 10yr yields tested a break higher from 1.80 and ultimately returned lower.We have the same sort of exploratory selling in early September and over the past 4 sessions, but 10's keep coming back for support at 1.80.

Superficially, that seems like good news, but the series of "higher lows" can't be ignored. From the July yield lows, there's a fairly regular trend connecting most of the bounces. That ominous uptrend in yield is the easy part to identify, but this 1.80 business could either be a true horizontal support area or simply a pause for consolidation on the way higher. It will be easier to determine that after today's session.

Speaking of today's session, it seems to have gotten its most significant boost overnight during the European hours. There's speculation that last night's presidential debate was a positive event for bond markets and negative for stocks but we're not super comfortable with that chain of causality. More on this later, but suffice it to say, Europe led domestic bond markets into stronger territory overnight either simply because the broader market is continuing to hold its ground and bounce in a "risk-off" direction or due to things like Moody's downgrading various Spanish debt.

Things have been and continue to be relatively slower than the end of the previous week and despite the fact that the consensus seems to be that the Fed can't have much to say tomorrow, we still think anticipation of tomorrow's FOMC Announcement could play a role int he current consolidative move.

Either way, it's been positive for bond markets so far with Fannie 3.0 MBS up 10 ticks at 104-22, just off the highs of the morning and 10yr yields down more than 4 bps at 1.769. There's no super significant data on tap for the day though the Richmond Fed Index reports at 10am and the 2yr Treasury auction goes off at 1pm. These aren't likely to register a response in MBS (especially the 2yr auction), but we'll let you know if they do.
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  :  "seems like there's still room for it to shake out either way, but as you say, it's a bit easier to see and be concerned about the uptrend in yields than it is to be confident that we're bouncing off a ceiling at 1.8"
Gus Floropoulos  :  "I think MG hit the nail on the head (as usual) regarding the consolidation + the higher lows=bearish trend..."
Scott Valins  :  "i agree Gus. Stocks down 200 and more worries in Europe and 10 year only dropping the mid 1.7s is a concern"
Gus Floropoulos  :  "I would be more concerned on the activity in 10's"
Jeff Anderson  :  "104-22/23ish seems like a tough nut to crack lately. C'mon Mbs's."
Scott Valins  :  "guessing it's part of seasonal adjustments"
Gus Floropoulos  :  "or do they treat them as if they are full time long term employment positions?"
Gus Floropoulos  :  "i wonder how the temporary holiday jobs being created will distort the upcoming employment #'s for the next few months.....MG, do they properly factor those jobs in as temporary when conducting the reports?"
Gus Floropoulos  :  "earnings have been weal all morning...especially on the revenue side"
John Rodgers  :  "I think bond markets like Obama"
Ken Crute  :  "at one time they were going sub 600 on retail with numerous overlays , which I think made it very unlikely to go thru "
Ira Selwin  :  "I would think it is on the retail side. I beleive they would go pretty low on their retail side?"
Gaius Rossini  :  "not sure if this was discussed already, but the wells change in minimum fico for non-wells serviced refinances to 640, is that significant?"
Steven Fishman  :  "5/3 - Wasnt it in the Dodd Frnak Bill?"
Josh Stika  :  "I've not Steven - Is it something your facing? Which lender?"
Steven Fishman  :  "Has anyone heard anything about 2013 compensation repayment for delinquent loans over 90 days in the first 14 months?"

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