It's difficult to say for sure whether or not bond markets have had a resilient morning as a result of weaker-than-expected ISM data or if they were predisposed to resilience from the start with ISM merely helping the process along. "Predisposed," in this context, wouldn't even imply a will of their own as bond markets/MBS seemed to take their cues from the domestic stock open with a high degree of correlation. But they only had 20-25 minutes to follow each other before the ISM data came out, which led to more stock selling and bond buying. Into the 11AM hour, Fannie 3.0 MBS are approaching unchanged levels after opening 7/32nds in the red.
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 11:08 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
MBS Near Highs Through Rate Sheet Time
After weaker-than-expected ISM Manufacturing PMI, bond markets continued a rally already underway since 9:40am. Treasury yields moved lower with stocks and MBS rose from 105-00 to 105-05.
In terms of the reprice outlook, this is probably not enough movement AND too soon in the day for all but one or two lenders to even be considering a positive reprice, let alone pulling the trigger. But if we continue to hold ground or improve from here, it might not take long.
More of an update though, that we're off the lows since the stock market open, helped along by a surprisingly "connected" reaction to econ data.
ECON: Residential Construction Spending Highest Since 2008, Probably...
- Spending +1.4 vs +0.5 consensus
- Rate of change smaller than margins of error.
- Biggest rise since May
- Total spending highest since Sept 2009
- Private residential spending highest since Nov 2008
- Minimal effect from Sandy
The U.S. Census Bureau of the Department of Commerce announced today that construction spending during October
2012 was estimated at a seasonally adjusted annual rate of $872.1 billion, 1.4 percent (±2.0%)* above the revised
September estimate of $860.4 billion. The October figure is 9.6 percent (±2.3%) above the October 2011 estimate of
During the first 10 months of this year, construction spending amounted to $707.4 billion, 9.3 percent (±1.3%) above the
$646.9 billion for the same period in 2011.
Spending on private construction was at a seasonally adjusted annual rate of $592.1 billion, 1.6 percent (±1.5%) above the
revised September estimate of $582.7 billion. Residential construction was at a seasonally adjusted annual rate of $294.2
billion in October, 3.0 percent (±1.3%) above the revised September estimate of $285.7 billion. Nonresidential
construction was at a seasonally adjusted annual rate of $297.9 billion in October, 0.3 percent (±1.5%)* above the revised
September estimate of $297.0 billion.
In October, the estimated seasonally adjusted annual rate of public construction spending was $280.1 billion, 0.8 percent
(±3.1%)* above the revised September estimate of $277.7 billion. Educational construction was at a seasonally adjusted
annual rate of $69.3 billion, 0.9 percent (±5.6%)* above the revised September estimate of $68.6 billion. Highway
construction was at a seasonally adjusted annual rate of $76.7 billion, 2.4 percent (±7.2%)* below the revised September
estimate of $78.6 billion.
ECON: ISM Manufacturing Much Weaker Than Expected
- PMI 49.5 vs 51.3 consensus
- New Orders 50.3 vs 54.2
- Manufacturing activity lowest since July 2009
- Employment index at 48.4, lowest since Sept 2009
Economic activity in the manufacturing sector contracted in November following two months of modest expansion, while the overall economy grew for the 42nd consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.
The PMI™ registered 49.5 percent, a decrease of 2.2 percentage points from October's reading of 51.7 percent, indicating contraction in manufacturing for the fourth time in the last six months. This month's PMI™ reading reflects the lowest level since July 2009 when the PMI™ registered 49.2 percent.
The New Orders Index registered 50.3 percent, a decrease of 3.9 percentage points from October, indicating growth in new orders for the third consecutive month.
The Production Index registered 53.7 percent, an increase of 1.3 percentage points, indicating growth in production for the second consecutive month.
The Employment Index registered 48.4 percent, a decrease of 3.7 percentage points, which is the index's lowest reading since September 2009 when the Employment Index registered 47.8 percent.
The Prices Index registered 52.5 percent, reflecting a decrease of 2.5 percentage points.
Comments from the panel this month generally indicate that the second half of the year continues to show a slowdown in demand; respondents also express concern over how and when the fiscal cliff issue will be resolved.
Fighting To Hold Ground After Late Risk Rally Overnight
The overnight session began well enough for bond markets with 10yr yields right in line with Friday's latest levels as late as 5:50am. Despite the relative flatness, several developments in Europe were already starting to weigh on Treasuries and Core EU debt.
Greece announced a bond buy-back with a price range that exceeded market expectations. The buy-back itself is part of last week's agreement, and not unexpected, but the price range wasn't yet determined. Bolstering the sense of positivity surrounding Greece was a separate report from a German paper over the weekend that Merkel raised the possibility of public sector haircuts on Greek debt (also seen as OSI or "official sector involvement"). Multiple Eurozone Finance Ministers quickly dismissed the possibility, but its mere mention by Merkel is "new," and probably an anecdote that errs on the side of bond market weakness in the US.
The biggest dose of weakness for domestic bond markets came late in the overnight session as Spain made a formal request of EU aid to the tune of €39.5 bln. It's important to note that this IS NOT a sovereign request, but rather, the decision on an amount for the "up to €100 bln" already agreed to for Spanish BANK RECAPITALIZATION. Some of the initial fervor of the reaction could be due to this distinction (though the reaction would likely have grown and been bigger if it was a sovereign request).
All of the above ushered domestic bond markets in the door at moderately weaker levels with 10yr yields coming in the door just over 1.64 and Fannie 3.0 MBS right at 105-00. Since then, MBS have been able to hold sort of a choppy, sideways slightly, while Treasuries have been clearly drifting higher in yield, though gently so. A slightly better-than-expected Manufacturing PMI reading from Markit played a small contributing role heading into the 9am hour, and 10am brings the ISM Manufacturing PMI. If it confirms the positivity, it will be interesting to note markets' willingness to react to economic data with other, bigger events looming (NFP this Friday, FOMC next week, Fiscal Cliff in general).
ECON: Markit PMI At Six Month High, Signalling Moderate Growth
- PMI 52.8 vs 52.4 Previously, 51.0 in October
- Output 53.5 vs 52.9 Previously, 51.4 October
- New Orders 53.6 vs 52.8 previously, 51.1 October
The expansion of the U.S. manufacturing sector gained traction in November, with the final Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) rising to its highest level in six months. At 52.8, up from 51.0 in October, the PMI was higher than the flash estimate of 52.4, and signalled a moderate improvement in overall business conditions.
PMI index readings above 50.0 signal an increase
or improvement on the prior month, while readings
below 50.0 indicate a decrease.
Manufacturing output increased further in
November, with approximately one-in-five surveyed
firms reporting higher production since October.
Moreover, output rose solidly over the month, with
the rate of growth the fastest since May. Sector data
indicated that the strongest output expansion was
reported by producers of consumer goods.
Live Chat Featured Comments
Matthew Graham : "RTRS-FED'S BULLARD: FED COULD REPLACE "OPERATION TWIST" WITH $25 BLN PER MONTH IN OUTRIGHT TREASURY PURCHASES AND STILL GET SAME IMPACT-WSJ"
Andrew Horowitz : "might not be mentioned but it appears traders are "thinking it""
Matthew Graham : "doesn't look like it got much mention"
Andrew Horowitz : "ouch, thats a big miss, blame it on Sandy?"
Matthew Graham : "RTRS- ISM U.S. MANUFACTURING EMPLOYMENT INDEX BELOW 50 FOR FIRST TIME SINCE SEPT 2009 "
Matthew Graham : "RTRS - ISM U.S. MANUFACTURING ACTIVITY INDEX AT LOWEST SINCE JULY 2009 "
Matthew Graham : "RTRS - ISM REPORT ON U.S. MANUFACTURING SHOWS PMI AT 49.5 IN NOVEMBER (CONSENSUS 51.3) VS 51.7 IN OCT "
Gus Floropoulos : "still over 105, still in the range, as long as we stay in the range I am content"
Ted Rood : "Chart would look pretty good if there'd been a rollover today!"
Victor Burek : "Handbook 4155.1: 4.B.2.c-d"
Victor Burek : "http://portalapps.hud.gov/FHAFAQ/controllerServlet?method=showPopup&faqId=1-6KT-879"
Mike Drews : "i've done 2 of them,so it can be done."
Jason York : "do you know where it is in the handbook, or what the guidelines are?"
Mike Drews : "document the transfer...has to be a certain distance..check your guidelines"
Jason York : "isn't there a way someone can get a 2nd FHA loan to purchase a new home with a job transfer?"
Matthew Graham : "RTRS - MARKIT U.S. MANUFACTURING PMI AND OUTPUT INDEXES AT HIGHEST SINCE MAY "
Matthew Graham : "RTRS - MARKIT U.S. MANUFACTURING SECTOR FINAL PMI EMPLOYMENT INDEX FOR NOV AT 52.6 VS FLASH READING 52.6 AND FINAL 51.8 IN OCT "
Matthew Graham : "RTRS - MARKIT U.S. MANUFACTURING SECTOR FINAL PMI FOR NOVEMBER AT 52.8 VS FLASH READING 52.4 AND FINAL 51.0 IN OCTOBER "
Andy Pada : "Lock on Fridays seems to be the new black."
Jeff Anderson : "GM, all. TGIM. And great, another GFee to pay for the country's ills. How cool is that!"
Jason Harris : "Speaking of taxes...I am interested to see how tax season looks if these goofballs don't get the AMT fixed"
Oliver S. Orlicki : "Rough start this am"