MBS Live: MBS Morning Market Summary
MBS actually managed to eke out a few ticks of higher prices than yesterday afternoon's best levels before headline risk took it's toll on bond markets in general.  Even then, the general tenor had been weaker for Treasuries overnight, but MBS stayed a bit stronger by comparison (again!).  Although MBS are still showing some level of determination to hold their ground vs weaker Treasuries, the whole bond complex is taking a hit on a duo of headlines helping the "risk-on" trade (higher stocks/higher bond yields).  The bigger of the two headlines is the potential ceasefire underway in Gaza.  A Hamas official told Reuters that the ceasefire was agreed upon, but CNN is reporting that Israel wants "24 hours of calm" before any agreement.  In other news, Eurozone officials are close to approving Greece's next bailout tranche.  This is likely the lesser of the two headlines, but also having a 'risk-on' effect, keeping pressure on bond markets.
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
104-26 : -0-05
FNMA 3.5
106-13 : -0-03
FNMA 4.0
106-31 : -0-03
FNMA 4.5
107-21 : -0-01
GNMA 3.0
106-09 : -0-05
GNMA 3.5
108-13 : -0-02
GNMA 4.0
109-06 : -0-01
GNMA 4.5
108-25 : +0-01
104-15 : -0-05
106-01 : -0-04
106-15 : -0-02
106-32 : +0-01
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 this morning.

10:36AM  :  ALERT ISSUED: MBS Fall A Quick 4/32nds. Negative Reprice Risk Already Increasing
As of now, it looks like bond markets are willing and able to digest a bit of weakness that began at 10:20am. It's not clear whether bond markets are responding to progressive upticks in stocks or if the weakness is owing in some way to the Fed's scheduled Twist buying. It could be as simple as a large block trade in Treasury futures going through around that time.

Causality it less important than the price action and it's effects on MBS. To that end, Fannie 3.0s are 4 ticks lower than they were at rate sheet time, and thus indicating a slight increase in negative reprice risk. It's a bit too early for most lenders, but some may be considering a negative reprice this soon in the day IF they released rate sheets before 10:15am.
9:32AM  :  ALERT ISSUED: MBS Creep Into Positive Territory, Outperforming Treasuries
Fannie 3.0s are up 1 tick at 104-31+ at the moment, despite 10yr yields trading in slightly weaker territory vs yesterday. Bond markets kicked off the overnight session in marginally stronger territory as Asian markets gave some credence to a Moody's downgrade of France. But the downgrade trade was faded at the onset of the European session, helped along by a strong short term debt auction in Spain (where we're told that rain falls mainly on the plain).

The European hours saw US 10yr yields drift from the mid 1.60's to 1.635 at 7am. Stock futures were mostly in lock-step overnight, suggesting a broad "risk-on" movement, but one that has thus far been clearly limited by yesterday afternoon's highs, at least as far as S&P futures are concerned. We're reluctant to read much at all into these generally lower volume "holiday week" hours and advocate the same.

That said, tomorrow could be a busier day and we can't completely ignore the fact that broader bond markets are giving the impression--at least from a technical perspective (sans volume)--that they're in the process of bouncing into weaker territory. This may or may not prove to be a concern by tomorrow afternoon as we could just as easily be leveling off in a sideways range between 1.65 and 1.55 in 10yr yields / 104-20 to 105-08 in Fannie 3.0 MBS.

The small amount of weakness in Treasuries so far this morning is very much a product of the overnight session as we've been trading fairly well despite stronger-than-expected Housing Starts data. Stock futures and TSY yields were already on the rise coming off a minor technical bounce ahead of the 8am hour.

There are no additional significant economic reports set for today, though Bernanke will speak in the afternoon and the Fed is in at 10:15-11:00am with a scheduled round of "Twist" buying. Here at 9:30am, the first move for cash equities markets has been down nearly 3 points in S&Ps which has helped TSYs hold their ground and MBS to continue flirting with the green.
8:44AM  :  ECON: Housing Starts Highest Since July 2008, Stronger Than Expected
- Starts +3.6 pct to 894k vs 840k consensus
- Permits -2.7 pct to 866k vs 865k consensus
- Multifamily Starts +11.9 pct, SFRs down 0.2 pct
- Commerce Dept says Sandy impact "minimal"

Privately-owned housing units authorized by building permits in October were at a seasonally adjusted annual rate of 866,000. This is 2.7 percent (±0.8%) below the revised September rate of 890,000, but is 29.8 percent (±1.8%) above the October 2011 estimate of 667,000. Single-family authorizations in October were at a rate of 562,000; this is 2.2 percent (±0.8%) above the revised September figure of 550,000. Authorizations of units in buildings with five units or more were at a rate of 280,000 in October.

Privately-owned housing starts in October were at a seasonally adjusted annual rate of 894,000. This is 3.6 percent (±13.1%)* above the revised September estimate of 863,000 and is 41.9 percent (±15.9%) above the October 2011 rate of 630,000. Single-family housing starts in October were at a rate of 594,000; this is 0.2 percent (±10.3%)* below the revised September figure of 595,000. The October rate for units in buildings with five units or more was 285,000.

Privately-owned housing completions in October were at a seasonally adjusted annual rate of 772,000. This is 14.5 percent (±15.6%)* above the revised September estimate of 674,000 and is 33.6 percent (±17.3%) above the October 2011 rate of 578,000. Single-family housing completions in October were at a rate of 542,000; this is 3.4 percent (±11.9%)* above the revised September rate of 524,000. The October rate for units in buildings with five units or more was 226,000.
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.

Jason Anker  :  "in process"
Jason Anker  :  "REPRICE: 10:42 AM - Chase Worse"
Michael Gannon  :  "i think this is a play to get out.....they mentioned they dont want to have this market share in their statement "
Michael Gannon  :  "i agree BC"
Michael Gillani  :  "Not to mention the fact that with the higher upfront and monthly MIP's, FHA is collecting a much higher margin on the post 2009 originated loans. Basically the qualified, credit worthy borrowers of the present are paying for FHA's lending mistakes of the past."
Michael Gillani  :  "That's what's funny Ted, FHA lending standards have already been raised substantially and the current FHA purchase/refinance borrower has to be of a much higher caliber than previously needed. The loans that have gone bad and continue to go bad are primarily loans that were originated prior to the collapse of the mortgage bubble. I would love to see statistics on the default rate of FHA mortgages that were originated after 2009. "
Ted Rood  :  "Driving existing FHA borrowers with great payment histories elsewhere by cutting off streamlines wouldn't appear to do much to either lower FHA's liabilities or increase their revenues. Sure, raise the standards for new loans if you must, but why penalize current borrowers by making MIP permanent for them?"
B-C  :  "i think they simply don't want the volume"
Jason Anker  :  "FHA should implement a LPMI option so at least buyers can write off the cost"
Michael Gillani  :  "It's amazing that a gov't that loves to hand out free, no strings attached money, wants to shut down a very reasonable and helpful lending program that since the meltdown and up until recently, has garnerd a high caliber, credit worthy clientele! With lower MIP, down payments and rates, many more 700+ borrower did and would have contiued to utilize FHA but since they've started skyrocketing MIP and now making it a lifetime deal, they will only attract the bottom of the barrel borrower that has "
B-C  :  "or they would probably do both"
B-C  :  "because FHA doesn't issue rates probably"
Michael Gillani  :  "Why doesn't FHA just get rid of the MIP monthly and just raise their interest rates by 2-3 pts instead, now that MIP is permanent moving forward?"
Matthew Graham  :  "I'd agree. I also would have thought it would be seen in November's Retail Sales more than October's, as well as some of the other "misses" last week"
Ira Selwin  :  "Will hit in Nov"
Matthew Graham  :  "~apparently"
Matthew Graham  :  "RTRS- US OCT HOUSING PERMITS 866,000 UNIT RATE (CONSENSUS 865,000) VS SEPT 890,000 UNIT RATE (PREV 890,000) "
Matthew Graham  :  "RTRS- US OCT HOUSING STARTS 894,000 UNIT RATE (CONSENSUS 840,000) VS SEPT 863,000 (PREV 872,000) "
Matthew Graham  :  "RTRS - US OCT HOUSING STARTS +3.6 PCT VS SEPT +15.1 PCT (PREV +15.0 PCT)"

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