MBS MID-DAY: Move Along... Nothing To See Here (Hopefully)
Today was all about confirming whether or not bond markets would be able to hold their ground before breaking through important technical support levels, both in terms of MBS and Treasuries. But right from the start, it seems that all the cards are down, and unequivocally suggesting that support has held. At this point in the session, with 10yr Treasuries well off their "line in the sand" level of 1.75 seen overnight and Fannie 3.0s well above their riskier 104-13 level (currently 4 ticks higher on the day at 104-22), it would take something substantial and unexpected for these levels to be tested again today. While this is never a guarantee that they won't be tested again next week, it does reinforce the current trend, increasing the significance we'll assign to the breakout, whenever it comes.
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 Holding Moderate Gains After Data
10yr yields were as high as 1.749 in the overnight session, but began to decline as soon as Europe came on line (2-3am New York time). Treasuries weren't willing to chase German Bunds lower in yield too quickly, but did make it back to yesterday afternoon's lows during the course of the European session. Despite that unwillingness to chase the Bunds initially, Treasuries WERE able to hold their ground at those slightly improved levels while Bund yields corrected back into more moderate territory, effectively maintaining those levels (1.725-1.735) until the domestic open.
Both MBS and Treasuries hit opening marks near unchanged levels vs yesterday's latest, but began to improve even before the economic data was released. Surprisingly, CPI data actually appears to have had a positive effect for bond markets (not that we expected a negative effect, but ANY effect from inflation data these days is rare). Markit PMI data looked to have caused an almost imperceptible pause for consideration, but flows picked up following the Industrial Production data from the Fed.
At first glance, the Industrial Production data was significantly better than expected, and markets looked as if they would trade it accordingly in the first 3-4 minutes following the release, but the report's internals--suggesting the bounce higher was largely a factor of correcting Sandy-related weakness--quickly shifted the momentum in the other direction. Stock futures fell and 10yr yields are now down to 1.7023. Fannie 3.0 MBS have seen some overhead resistance at 104-24, but currently trade 4 ticks higher on the morning at 104-23.
So far so good, then, with respect to holding technical ground mentioned in The Day Ahead
. From here on out, there's little else by way of guidance, so we're either waiting for Cliff headlines or simply doing some sort of Tango with the stock lever, hoping to close inside those relatively important support levels.
ECON: Industrial Output Stronger, Fed Cites Post-Sandy Bounce-Back
- Output +1.1 vs +0.3 Consensus, -0.7 Previous
- Capacity Use 78.4 vs 78.0 consensus, 77.7 previous
- Fed says gains largely reflect bounce-back at industries affected by Sandy, vehicle output gains a factor
Industrial production increased 1.1 percent in November after having fallen 0.7 percent in October. The
gain in November is estimated to have largely resulted from a recovery in production for industries that had been
negatively affected by Hurricane Sandy, which hit the Northeast region in late October. In November, manufacturing output increased 1.1 percent after having decreased 1.0 percent in October; in addition to the
storm-related rebound, a sizable rise in the production of motor vehicles and parts boosted factory output in
November. The output of utilities advanced 1.0 percent, and production at mines rose 0.8 percent. At
97.5 percent of its 2007 average, total industrial production in November was 2.5 percent above its year-earlier
level. Capacity utilization for total industry increased 0.7 percentage point to 78.4 percent, a rate 1.9 percentage
points below its long-run (1972–2011) average.
ECON: Markit PMI Shows December Off To Stronger Start
- PMI rises to eight-month high and signals solid improvement in business conditions
- Strongest rates of output and new order growth since April
- Solid rate of job creation
- Input price inflation remains sharp
At 54.2, the Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) signalled a solid improvement in U.S. manufacturing business conditions during December. Up from 52.8 in November, the ‘flash’ PMI reading, which is based on around 85% of usual monthly replies, indicated the strongest rate of growth for eight months.
ECON: Consumer Price Index Lower Than Expected
- Headline CPI -0.3 vs -0.2 consensus
- Core CPI +.1 vs +.2 consensus
- Sandy had little effect on data collection
- First decline in headline CPI since May, but note that Core CPI (excludes food/energy) still rose. Thank you Gasoline (-7.4 pct)
The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.3
percent in November on a seasonally adjusted basis, the U.S. Bureau
of Labor Statistics reported today. Over the last 12 months, the all
items index increased 1.8 percent before seasonal adjustment.
The gasoline index fell 7.4 percent in November; this decrease more
than offset increases in other indexes, resulting in the decline in
the seasonally adjusted all items index. The energy index fell 4.1
percent in November despite increases in the indexes for natural gas
and electricity. The food index rose 0.2 percent with the food at
home index increasing 0.3 percent, the same increases as in October.
Live Chat Featured Comments
Matthew Graham : "RTRS - MOYNIHAN: PRIVATE INVESTORS WILL RETURN TO MORTGAGE MARKET ONCE RULES ARE LAID OUT "
Paul L. Martin : "Cap use includes utilities...take them off-line for Sandy and you change the denominator is my guess."
Matthew Graham : "any math folks out there or yelling about it on TV that could relate the 0.4 pct change in Cap use to the headline?"
Chris Kopec : "Lots of cars got wiped out in that storm."
Brett Boyke : "Portends for potentially strong NFP"
Matthew Graham : "RTRS- FED SAYS INDUSTRIAL OUTPUT GAIN LARGELY REFLECTS BOUNCEBACK AT INDUSTRY AFFECTED BY SANDY; VEHICLE OUTPUT GAIN ALSO A FACTOR "
Matthew Graham : "RTRS - U.S. NOV CAPACITY USE RATE 78.4 PCT (CONS 78.0 PCT) VS OCT 77.7 PCT (PREV 77.8 PCT) "
Matthew Graham : "RTRS - U.S. NOV INDUSTRIAL OUTPUT +1.1 PCT (CONSENSUS +0.3 PCT) VS OCT -0.7 PCT (PREV -0.4 PCT) "
Matthew Graham : "RTRS - MARKIT US MANUFACTURING OUTPUT, NEW ORDERS AND EMPLOYMENT INDEXES AT HIGHEST SINCE APRIL "
Matthew Graham : "RTRS - MARKIT U.S. MANUFACTURING SECTOR FLASH PMI EMPLOYMENT INDEX FOR DEC AT 54.4 VS 52.6 IN NOV "
Matthew Graham : "RTRS - MARKIT U.S. MANUFACTURING SECTOR FLASH PMI OUTPUT INDEX FOR DEC AT 55.1 VS FINAL 53.5 IN NOV "
Matthew Graham : "RTRS- MARKIT U.S. MANUFACTURING SECTOR FLASH PMI FOR DECEMBER AT 54.2 (CONSENSUS 52.0) VS FINAL 52.8 IN NOVEMBER "
Matthew Graham : "hopefully it holds up, but yeah, so far so good"
Christopher Stevens : "I like this bounce off your horizontal line MG"
Matthew Graham : "RTRS - U.S. NOV CPI DECLINE FIRST SINCE MAY 2012 "
Matthew Graham : "RTRS - U.S. LABOR DEPT SAYS SUPERSTORM SANDY HAD LITTLE EFFECT ON DATA COLLECTION FOR NOV CPI "
Matthew Graham : "RTRS- U.S. NOV REAL EARNINGS ALL PRIVATE WORKERS +0.5 PCT (CONS +0.1 PCT) VS OCT -0.5 PCT (PREV -0.2 PCT) "
Matthew Graham : "RTRS - U.S. NOV CPI -0.3 PCT (-0.3133; CONSENSUS -0.2 PCT), EXFOOD/ENERGY +0.1 PCT (+0.1126; CONS +0.2 PCT) "