Bond markets improved steadily and uneventfully in the overnight session ushering Treasuries 2-3 bps lower (10yr yields) and paving the way for MBS to open up 2 ticks higher in Fannie 3.0s. Most of the first two hours of the morning continued the positivity for bond markets while equities futures hit their lowest levels of the week at 10:06am. All of the above was helped along by comments from Erskine Bowles' on a Fiscal Cliff deal being unlikely before the end of the year as well as weaker-than-expected New Home Sales. The volume and volatility picked up roughly 20 minutes later as Speaker Boehner was out with optimistic comments on Fiscal Cliff negotiations. Notably, the comments weren't at all dissimilar from things he's said previously regarding "revenues being on the table," but markets unquestionably responded. Utah Senator Orrin Hatch added a supporting role to the optimism, saying the two parties were only $23 billion away from an agreement. The unquestionable response amounted to MBS heading back to their session lows of 105-06--still up 2 ticks vs yesterday, but 6 ticks off morning highs.
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 11:05 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 Briefly Dip To Session Lows As Stocks Bounce Back
Bond markets and especially equities markets continue to show an increasing tendency to whip around on any and all headlines pertaining to the Fiscal Cliff. In rapid succession this morning, we've had Erskin Bowles, John Boehner, and Orrin Hatch out with 'Cliffy' comments (negative, positive, positive, respectively).
The Bowles' comments flew somewhat under the radar as they made rounds at the same time that the New Home Sales data was released, but definitely added to the stock market's swoon. Shortly thereafter, Boehner spoke optimistically, and stocks rallied in spite of the absence of any new information. Treasuries and MBS began to give up some ground at that point and have recently been nudged into slightly weaker territory after additional comments from Utah's Hatch indicating a 'mere' $23 bln gap separating republicans and democrats over the Fiscal Cliff.
Fannie 3.0s are now benefiting from a sideways momentum that earlier had them underperforming Treasuries. As these headlines hit, MBS have been better able to hold sideways versus the more volatile response in Treasuries (most volatile in stocks! Over 10 points trough to peak on Cliff comments alone!).
Even so, MBS have been pushed to within a few ticks of their weakest levels of the morning, currently 105-08 (earlier low was 105-06). With the Fed's scheduled Twist buying set to conclude at 11am and Obama scheduled to speak at 11:35am, it makes sense to stay vigilant/guarded again the prospect of additional volatility in the next hour.
ECON: New Home Sales Weaker Than Expected, Lower Revisions
- 368k unit annual rate vs 390k consensus
- Last month revised to 369k from 389k
- Northeast region -32.3 pct, midwest up record 62.2 pct
- Commerce dept says 'minimal effect' from Hurricane
- Gigantic margin of error ±18.3 pct on the monthly change
Sales of new single-family houses in October 2012 were at a seasonally adjusted annual rate of 368,000, according to
estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.
This is 0.3 percent (±18.3%)* below the revised September rate of 369,000, but is 17.2 percent (±21.2%)* above the
October 2011 estimate of 314,000.
The median sales price of new houses sold in October 2012 was $237,700; the average sales price was $278,900. The
seasonally adjusted estimate of new houses for sale at the end of October was 147,000. This represents a supply of 4.8
months at the current sales rate.
Bond Markets Calmly Stronger Overnight, Flat Morning For MBS
US Treasuries hit the Asian open at Tuesday's best levels after comments from Senate Majority Leader Reid continued to provide a "risk-off" bid. 10's began rallying steadily into the European session with 10's moving from 1.64 to just under 1.61 at the US open. European markets eventually got on board with the Treasury rally, but the fact that it was Treasury-led, seems to suggest more underlying focus on domestic issues, where the Fiscal Cliff is currently the 800-lb gorilla.
There are, however, no "scheduled releases" of Fiscal Cliff information, so the constant sense of "waiting" has markets a bit nervous. We're now into trading levels in Treasuries that discount almost all the recent positivity over the Greece deal. 10yr yields have moved back to the bottom of their two month range while the Euro is still slightly higher than the midpoint of its range over the same time.
In such "risk-off" moves, Treasuries typically benefit more readily than MBS. That's the case this morning as Fannie 3.0s trade 4 ticks higher at the moment (105-08) while 10yr TSYs are 10 ticks higher in price (comparing price to price isn't always a reliable indicator of relative performance, but in today's case, we'd note that spreads are indeed a few bps wider, confirming the Treasury outperformance).
Still, most of the directional gains were in the overnight session and while Treasuries maintain a bit of that positive momentum, they've taken a decidedly sideways step since 9am and haven't extended into better territory despite a weak open for US stock markets. MBS are even more decidedly sideways in a tight range between 105-07 and 105-10. We haven't had any economic data yet this morning, apart from the weekly Mortgage Applications data early this morning. 'New Home Sales' is coming up at 10am followed by Fed Twist buying from 10:15-11:00 and the 5yr Treasury Auction at 1pm. President Obama is also scheduled to speak at 11:35am ET.
Live Chat Featured Comments
Matthew Graham : "Maybe a hedge against further positive/promising comments from Obama at 11:35 as well."
Matthew Graham : "IMO, this really speaks to how emotional and 'on edge' markets are re: Fiscal Cliff. Nothing new brought to the table other than the word "optimistic.""
Victor Burek : "figured since stocks were tanking someone was gonna come out and say something positive"
Matthew Graham : "nothing new here. Boehner said "room for revenues" on 11/3. "
Matthew Graham : "RTRS - U.S. HOUSE SPEAKER BOEHNER SAYS WILLING TO PUT REVENUES ON THE TABLE IF ACCOMPANIED BY SPENDING CUTS, OPTIMISTIC DEAL WITH OBAMA CAN BE REACHED "
Andy Pada : "Yeah, with the exception of last week of Sept. and first week of Oct., we seem to be on the high side of our range."
Alan Craft : "Me too. Gonna lock a few"
Brent Borcherding : "Good thinking AP."
Andy Pada : "I think I will be locking in today."
Matthew Graham : "RTRS - US COMMERCE DEPT SAYS EFFECT FROM SUPERSTORM SANDY 'MINIMAL' ON OCT HOME SALES DATA, DID NOT AFFECT DATA COLLECTION "
Matthew Graham : "RTRS- US OCT HOME SALES NORTHEAST -32.3 PCT, MIDWEST RECORD +62.2 PCT, SOUTH -11.6 PCT, WEST +8.8 PCT "
Matthew Graham : "RTRS- US OCT SINGLE-FAMILY HOME SALES -0.3 PCT VS SEPT +0.8 PCT (PREV +5.7 PCT)"
Matthew Graham : "RTRS- US OCT SINGLE-FAMILY HOME SALES 368,000 UNIT ANN. RATE (CONS 390,000) VS SEPT 369,000 (PREV 389,000) "
John Paul Mulchay : "Was fearing that. Deal saves client just under a grand/month and that's going to be the killer. "
Matt Hodges : "gotta believe $5700, jpm. if once furloughed, chances of future furlough are greater"
John Paul Mulchay : "Anyone know what income UW will use when salary is like 6k/month but actual is 5700/month due to furlough? I have documentation that it's temp furlough ending in June 2013. "
Nate Miller : "I used trainingpro, did an 8 hr live webinar yesterday was real basic, no tests or waiting for timed screens, I was able to work at the same time."
Scott Valins : "im doing BrokerCE - right on site its 49.99. A bit of a pain as you can't advance to next screen until the speaker finishes his slooow text"
Alan Craft : ": www.mortgageeducators.com"
Joel Marks : "Did brokerce also because it was the cheapest and I thought it was solid. You can find a $10 off coupon online which made it $51.95 all in."