It's been a wild morning for market events, unexpected headlines, and corresponding reactions across diverse markets. In a true sign of the times, the significantly weaker than expected economic data earlier this morning actually did next to nothing to motivate any of the swings. Instead, it has been the "unscheduled" news that's had the biggest impact. Shortly before their close, European equities began tanking and domestic equities and bond yields followed after news hit that Hamas launched a rocket at Jerusalem. That was the first big jolt higher for MBS prices of the day. Everything took on a "flight-to-safety" sort of feeling after that, with Europe weakening further into its close and bond markets getting snowball "forced buying," complimented by forced selling in equities. But everything snapped back with a vengeance as congressional leaders emerged from meetings with the President on the Fiscal Cliff and were generally more upbeat and enthusiastic about progress than we've seen them be recently. This had a huge impact on equities and reversed a good measure of the MBS rally, bringing us back down to the levels seen before the Hamas rocket attack news. MBS have since been able to bounce, but the rest of the session remains highly uncertain. We want to be careful not to underestimate just how immense a deal the ongoing Fiscal Cliff Debate will be and are very much on guard for any additional headlines.
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 11:06 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
Bond Markets In Better Territory After Weak Data, Stock Slide
The overnight session was essentially a non-issue for bond markets as 10yr yields held within the same range of yields that prevailed during yesterday's post-ISM data rally--just under 1.60 on the high end and just over 1.575 on the low.
We opened up in slightly (very slightly) weaker territory in the domestic session, and leaked a bit weaker into the 9:15 Industrial Production data, which was much worse than expected. Although the data cite Megastorm Sandy as adjusting the rate-of-change by "nearly 1%," it doesn't seem that equities markets think that's enough of a mitigating circumstance. S&P futures are off nearly 10 points from their highs of the morning with much of the move arriving with the 9:30am cash open.
As has been the general case recently, bond markets have paid some attention to the stock sell-off, but clearly look like they're not eager to venture beyond important technical levels simply to give chase. 10yr yields are down to 1.587, but haven't eagerly tried to revisit the overnight lows despite the significant stock slide.
Fannie 3.0s are fairing a bit better (again) vs yesterday's range and have now actually hit a new 3-day higher up 5 ticks at 105-01.
ECON: Industrial Production Weaker Than Expected, Storm Cited
- Output down 0.4 pct vs +0.2 consensus
- Capacity Utilization 77.8 vs 78.3 consensus
- Hurricane reduced rate of change in output by nearly 1%
Industrial production declined 0.4 percent in October after having increased 0.2 percent in September. Hurricane Sandy, which held down production in the Northeast region at the end of October, is estimated to have reduced the rate of change in total output by nearly 1 percentage point. The largest estimated storm-related effects included reductions in the output of utilities, of chemicals, of food, of transportation equipment, and of computers and electronic products. In October, the index for manufacturing decreased 0.9 percent; excluding storm-related effects, factory output was roughly unchanged from September. The output of utilities edged down 0.1 percent in October, and production at mines advanced 1.5 percent. At 96.6 percent of its 2007 average, total industrial production in October was 1.7 percent above its year-earlier level. Capacity utilization for total industry decreased 0.4 percentage point to 77.8 percent, a rate 2.5 percentage points below its long-run (1972--2011) average.
Live Chat Featured Comments
Daniel Kramer : "you mean to tell me people who dont have any money and high DTI and losuy credit who were allowed to put down 3% of gifted money are defaulting on their loans in large numbers???"
B-C : "well David, i am sure raising the premium will cut that number in half?"
David Gaffin : "On Bloomberg, they mentioned 17% of FHA in default. Anyone know the breakdown of the origination timeframe on that number?"
Steven Stone : "you want to generate ore revenue, raise the upfront to 3% and let all the people from 2009-2010-2011 to refi"
David Gaffin : "I would prefer they go back to 2.25% and lower monthly mi"
Matt Hodges : "just penalizing FTHB, who tend not to have 680 scores... smacks of discrimination"
Gaius Rossini : "FHA is trying to reduce market share right?"
Matt Hodges : "10 bps on already bloated cost is a joke"
Gaius Rossini : "this was a long time coming though, i think a lot of people were expecting it"
Gaius Rossini : "the fha website is slow to update, the actuarial report isn't even out yet."
Gaius Rossini : "it also said that 'more relief for troubled borrowers' is coming, i have no idea what that means"
Gaius Rossini : "my bloomberg headline screen"
Steven Stone : "GR where did you read that?"
Steven Stone : "forget that...they are going to start running off and all they will be left with are defaults"
Steven Stone : "could they be any less competitive?"
Gaius Rossini : "*DONOVAN SAYS FHA TO RAISE MORTGAGE INSURANCE PREMIUMS BY 10 BPS"
Matthew Graham : "RTRS - FED SAYS OCT MANUFACTURING OUTPUT EXCLUDING STORM-RELATED EFFECTS WAS "ROUGHLY UNCHANGED" FROM SEPT "
Matthew Graham : "RTRS- U.S. OCT MANUFACTURING OUTPUT -0.9 PCT VS SEPT +0.1 PCT; CAP USE 75.9 PCT, LOWEST SINCE NOV 2011, VS SEPT 76.7 PCT "
Matthew Graham : "RTRS- FED ESTIMATES HURRICANE SANDY REDUCED THE RATE OF CHANGE IN OCT INDUSTRIAL OUTPUT "BY NEARLY 1 PERCENTAGE POINT" "
Matthew Graham : "RTRS- U.S. OCT INDUSTRIAL OUTPUT -0.4 PCT (CONSENSUS +0.2 PCT) VS SEPT +0.2 PCT (PREV +0.4 PCT) "
Matthew Graham : "RTRS- JAPAN U.S. TREASURY HOLDINGS $1.1307 TRLN IN SEPTEMBER VS $1.1228 TRLN IN AUGUST"
Christopher Stevens : "how far away is your 30 day rate from your 60 day rate...1/8th? I am thinking any bit of positive news regarding the fiscal cliff will drive stocks up as well as rates. I am not saying rates will sky rocket but I would certainly rather play it safe as a consumer. It seems like a risky game for a savings of $10-30/month. I would think the client would be more upset paying $30 more per month than missing out on saving $30.month."
Matthew Graham : "RTRS- CHINA U.S. TREASURY SECURITIES HOLDINGS $1.1555 TRLN IN SEPTEMBER VS $1.1552 TRLN IN AUGUST "
Matthew Graham : "RTRS- U.S. SEPTEMBER NET LONG-TERM INFLOW (EX-SWAPS/OTHER) $3.3 BLN VS REV $90.3 BLN REVISED INFLOW IN AUGUST "
Matthew Graham : "Jason, not much risk in 9am news. More with 9:15, but IP isn't really an epic market mover unless it misses or beats by silly amount"
Jason Anker : "MG - how much risk in the 9am news today?"