MBS Live: MBS Morning Market Summary
Similarities abound between Wednesday and Thursday across the market.  In both cases, the overnight session began with a moderately positive tone for bond markets that carried through to 6am.  Like yesterday, the gradual onset of pre-market domestic trading brought losses  for Treasuries, though both MBS and Treasuries were slightly improved vs yesterday's close.  Once again, bond markets bounced back from pre-open weakness and made strong gains into the 10am hour, helped along by selling in equities.  Finishing out the catalog of similarities, bond yields and stock prices rose mid-morning, though today's instance coincided with a glut of economic data at 10am.  MBS are off their highs , but with the same sort of moderation  as seen in the previous session, keeping them in positive territory on the day.
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
104-17 : +0-05
FNMA 3.5
106-11 : +0-03
FNMA 4.0
106-31 : +0-02
FNMA 4.5
107-24 : -0-01
GNMA 3.0
105-30 : +0-03
GNMA 3.5
108-11 : +0-02
GNMA 4.0
109-13 : +0-01
GNMA 4.5
109-08 : +0-01
104-08 : +0-05
106-00 : +0-03
106-16 : +0-02
106-31 : -0-01
Pricing as of 11:04 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.

10:27AM  :  Bond Markets Off Best Levels Following Economic Data
Much like yesterday's overnight session, bond markets drifted calmly and narrowly into stronger territory during Asian and European hours with 10yr yields bottoming out around the 6am hour. As if scripted, the appearance of pre-market domestic trading pushed yields and volume higher into the 8am hour.

Also like yesterday, we got a decent bounce into improved territory ahead of the cash open for stock markets, with lower prices out of the gate helping extend the bond market rally. From 9am to 10am, 10yr yields had moved from 1.80 to nearly 1.77, MBS from 104-13 to 104-19 (Fannie 3.0s).

But unlike yesterday, there was a lot of economic data this morning, not to mention the fact that it made for slightly better viewing in light of the fact that Fiscal Cliff news quickly shifted back from "progress" to "posturing" yesterday.

All of the data at 10am was economically bullish, with Philly Fed's big reversal into positive territory clearly leading the way for stock markets and bond yields to bounce off their lows of the morning. Since then, 10's are back up to 1.7875, equities are at session highs, and MBS are roughly 3/32nds off their 10am highs.

The question now becomes: is economic data enough of a motivation for this selling trend to continue in light of the looming possibilities of Fiscal Cliff headlines? So far, there's been some decent push back as stock markets over the past few minutes seem to be shying away from breaking overnight highs and Treasury yields have only retraced about 50% of their move from the highs to lows this morning (same story with MBS for that matter).

These developments speak to a market that prefers to be contained and cautious rather than pioneer new directional trends. With 1.80 as overhead support in 10's and 104-13 underfoot in MBS, we'd stay optimistic. If those defensive levels break down, not only would we be in negative reprice risk territory, but it would be the first serious challenge to the gentle but consistent rebound from mid-week weakness.
10:10AM  :  ECON: Existing Home Sales Higher Than Expected
- EHS +5.9 pct to 5.04 mln annual rate (4.87 mln consensus)
- Inventory lowest since Dec 2001 on outright basis
- "months" of inventory lowest since Sept 2005
- 22 pct distressed, down from 24

(December 20, 2012) - Existing-home sales continued to improve in November with low inventory supply pressuring home prices, according to the National Association of Realtors®.

Total existing-home sales1, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 5.9 percent to a seasonally adjusted annual rate of 5.04 million in November from a downwardly revised 4.76 million in October, and are 14.5 percent higher than the 4.40 million-unit pace in November 2011. Sales are at the highest level since November 2009 when the annual pace spiked at 5.44 million.

Lawrence Yun , NAR chief economist, said there is healthy market demand. "Momentum continues to build in the housing market from growing jobs and a bursting out of household formation," he said. "With lower rental vacancy rates and rising rents, combined with still historically favorable affordability conditions, more people are buying homes. Areas impacted by Hurricane Sandy show storm-related disruptions but overall activity in the Northeast is up, offset by gains in unaffected areas."
10:07AM  :  ECON: Philly Fed Index Turns Positive, Highest Since April
- Philly Fed Index 8.1 vs -3.0 Consensus
- New Orders 10.1 vs -4.6 previously
- New orders highest since February
- Employment/Business Conditions highest since April

Manufacturing activity rebounded this month, according to firms responding to the December Business Outlook Survey. Following reported declines in business activity in late October and early November from the effects of Hurricane Sandy, most of the survey’s measures showed notable improvement this month. The survey’s broad indicators of future activity also showed improvement this month.

Indicators Suggest a Pickup at Year-End

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a reading of ‑10.7 in November to 8.1 this month. This is the highest reading since April and is slightly above the reading before the post-storm decline in November (see Chart). The demand for manufactured goods picked up: the new orders index increased 15 points, from ‑4.6 in November to 10.7 this month. The current shipments index also improved notably, rising by 25 points.

Labor market conditions at the reporting firms improved marginally this month. The current employment index, at 3.6, registered its first positive reading in six months. The percentage of firms reporting increases in employment (20 percent) narrowly exceeded the percentage reporting decreases (16 percent). Firms also indicated an increase in the average workweek compared to last month.
8:44AM  :  ECON: 3rd Quarter Final GDP Slightly Higher Than Preliminary Reading
Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 3.1 percent in the third quarter of 2012 (that is, from the second quarter to the third quarter), according to the "third" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.3 percent.

The GDP estimate released today is based on more complete source data than were available for the "second" estimate issued last month. In the second estimate, the increase in real GDP was 2.7 percent (see "Revisions" on page 3). The third estimate has not greatly changed the general picture of the economy for the third quarter except that personal consumption expenditures (PCE) is now showing a modest pickup, and imports is now showing a downturn.

The increase in real GDP in the third quarter primarily reflected positive contributions from PCE, private inventory investment, federal government spending, residential fixed investment, and exports that were partly offset by a negative contribution from nonresidential fixed investment. Imports, which are a subtraction in the calculation of GDP, decreased.

The acceleration in real GDP in the third quarter primarily reflected upturns in private inventory investment and in federal government spending, a downturn in imports, an upturn in state and local government spending, and an acceleration in residential fixed investment that were partly offset by a downturn in nonresidential fixed investment and a deceleration in exports.
8:40AM  :  ECON: Jobless Claims Slightly Higher Than Expected
- Claims up to 361k vs 357k consensus and 344k previously

In the week ending December 15, the advance figure for seasonally adjusted initial claims was 361,000, an increase of 17,000 from the previous week's revised figure of 344,000. The 4-week moving average was 367,750, a decrease of 13,750 from the previous week's unrevised average of 381,500.

The advance seasonally adjusted insured unemployment rate was 2.5 percent for the week ending December 8, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending December 8 was 3,225,000, an increase of 12,000 from the preceding week's revised level of 3,213,000. The 4-week moving average was 3,240,500, a decrease of 33,500 from the preceding week's revised average of 3,274,000.
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 York  :  "yeah, I figured it out, I don't know if this helps, but I ran into this on a VA loan....was just going to mention that, I was able to get it waived, as the tap fees alone were about $11,000"
Jeff Anderson  :  "If the connection fee is 3% or more of the sales price you can get a waiver."
Jeff Anderson  :  "Hey JY, FHA DOES have a requirement if a property has access to public sewer it MUST be connected. In the middle of one right now."
Jason York  :  "Anyone know if FHA has the same requirement as VA for a property to be on public sewer and water, if it is available?"
Jim Begley  :  "TM Plaza and Streans will do it w/o an AVM if currently serviced by Wells."
Bryce Schetselaar  :  "Icon will I think...if credit is over 700"
Tim Mitchell  :  "i have a VA IRRRL in CA - can't get an AVM, not enough comps, can't send it to 5/3 cause they aren't in CA, according to zillow it's around 125% LTV, anyone else doing "no appraisal" VA IRRRL's in CA? Current lender is Guild Mortgage"
Ted Rood  :  "Data doesn't bode well for MBS market today once Fed buying is done. Need some fiscal cliff drama, anyone got Pelosi's #?"
Andy Pada  :  "the unfortunate consequence of floating until 2013 is that you don't close until 2013"
Alan Craft  :  "Health care...not exactly discretionary"
Paul L. Martin  :  "Consumer spending rose at a 1.6 percent annual pace from July through September, compared with the 1.4 percent advance previously reported and a 1.5 percent rise in the prior quarter. Household purchases contributed 1.12 percentage points to growth in the third quarter. The gain primarily reflected more spending for health care services, the agency said."
B-C  :  "float into 2013?"
Matthew Graham  :  "RTRS- US JOBLESS CLAIMS ROSE TO 361,000 DEC 15 WEEK (CONSENSUS 357,000) FROM 344,000 PRIOR WEEK (PREVIOUS 343,000) "
Matthew Graham  :  "All other internals roughly in line with previous reading--not seeing any major surprises"
Matthew Graham  :  "RTRS - US Q3 EXPORTS +1.9 PCT (PREV +1.1 PCT), IMPORTS -0.6 PCT (PREV +0.1 PCT), FIRST FALL SINCE Q2 2009 "
Matthew Graham  :  "RTRS- US FINAL Q3 GDP +3.1 PCT (CONSENSUS +2.8 PCT), PREV +2.7 PCT; FINAL SALES +2.4 PCT (CONS +2.0 PCT), PREV +1.9 PCT "

Read what our user's have to say about MBS Live on LinkedIn.
» Start a two week free trial of MBS Live.