Risk markets tanked early in the overnight session (stocks and bond yields sharply lower) after news hit that the House didn't have enough support for the Plan B Fiscal Cliff counteroffer to even vote. S&P futures initially fell the better part of 40 points and 10yr yields dipped into the 1.73s. Both sides of the market pulled back steadily after those moves with 10's back up to 1.77 by the domestic open. This helped MBS walk in the door at 104-18, roughly in line with yesterday's highs. Bond markets continued to improve as stateside trade screens warmed up, pausing only briefly to consider the stronger economic data that, on any other day, would probably have motivated a bit more weakness. But markets are intently focused on the Fiscal Cliff drama, and more was made available with a Boehner/Cantor press conference at 10am. The mere act of taking the podium and actually fielding reporters' questions was enough for stocks to rally and bonds to take a hit. 10yr yields moved up to 1.76 from 1.74 before the press conference, and since then have been drifting lower and sideways between those two levels. Analogous levels for MBS were 104-19 and 104-25 in Fannie 3.0s.
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
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MBS Fall To Mid-Range Support After Press Conference
Overnight news that House wouldn't even vote on the "Plan B" tax and spending bill sent equities markets into a tailspin and helped 10yr yields make a run toward their recent 1.75 technical boundary (currently shared with the 200-day moving average). 10's actually broke through and made it 10 1.737 by 9am but bounced higher following a recent press conference with Speaker Boehner and Majority Leader Cantor.
That was the latest in a series of market movements that showed a disregard for economic data in favor of Fiscal Cliff headlines and year-end positioning. Earlier in the morning, a big block trade in 10yr futures hit 5 minutes BEFORE economic. These aren't Vegas-style "bets" ahead of an event, but rather a response to overnight news, or the covering of a short position taken out in early December or mid November when yields were in the high 1.5's.
Further to the point of "bigger fish to fry," this morning's economic data was unanimously better-than-expected, yet bond markets extended gains--not their standard move following stronger data. However, there was perhaps a brief pause for consideration. MBS opened at 104-18 and moved up to 104-22 by the time data hit. There was some back and forth just after 8:30am data, but they kept on improving to 104-26 before bond markets rand out of steam at 9am.
After some well-contained drifting ahead of Consumer Sentiment data and the Boehner/Cantor press conference, stock prices and bond yields began rising together. This took Fannie 3.0s back down to 104-20, but they've since recovered to 104-22. Bottom line, we're about half way between opening levels and the highs of the morning, with opening levels themselves having fallen in line with yesterday's highs. Early rate sheets are in line with the highs of the day, so extra caution is required there, but thankfully, 104-19 / 104-20 is emerging as a good intraday technical support level, and this could serve as a good line in the sand for any reprice risk that emerges later in the day.
ECON: Durable Goods Orders Higher Than Expected
- Durable Goods Orders +0.7 vs +0.2 Consensus
New orders for manufactured durable goods in
November increased $1.6 billion or 0.7 percent to
$220.9 billion, the U.S. Census Bureau announced
today. This increase, up six of the last seven months,
followed a 1.1 percent October increase. Excluding
transportation, new orders increased 1.6 percent.
Excluding defense, new orders increased 0.8 percent.
Machinery, up three consecutive months, had the
largest increase, $1.0 billion or 3.3 percent to $32.0
Revised seasonally adjusted October figures for all
manufacturing industries were: new orders, $478.9
billion (revised from $477.6 billion); shipments, $483.2
billion (revised from $482.3 billion); unfilled orders,
$983.4 billion (revised from $982.9 billion); and total
inventories, $615.3 billion (revised from $616.0 billion).
ECON: Consumer Spending Turns Positive In November, Incomes Higher
Personal income increased $85.8 billion, or 0.6 percent, and disposable personal income (DPI)
increased $74.7 billion, or 0.6 percent, in November, according to the Bureau of Economic Analysis.
- Income +0.6 vs +0.3 consensus
- Core PCE Prices 0.0 vs +0.1 consensus
- Consumer Spending +0.4 vs +0.3 consensus, -0.1 previously
Personal consumption expenditures (PCE) increased $41.3 billion, or 0.4 percent. In October,
personal income increased $7.5 billion, or 0.1 percent, DPI increased $6.4 billion, or 0.1 percent,
and PCE decreased $6.6 billion, or 0.1 percent, based on revised estimates.
Real disposable income increased 0.8 percent in November, in contrast to a decrease of 0.1 percent
in October. Real PCE increased 0.6 percent, in contrast to a decrease of 0.2 percent.
Personal outlays -- PCE, personal interest payments, and personal current transfer payments -- increased $42.6 billion in
November, in contrast to a decrease of $5.3 billion in October. PCE increased $41.3 billion, in contrast to a decrease of $6.6 billion.
Live Chat Featured Comments
Matthew Graham : "RTRS- BOEHNER SAYS PLAN FAILED IN HOUSE BECAUSE OF MISPERCEPTIONS THAT IT WOULD RAISE TAXES "
Matthew Graham : "RTRS - BOEHNER SAYS UP TO OBAMA, HIS FELLOW DEMOCRATS IN CONGRESS TO REACH SOLUTION ON FISCAL CLIFF "
Victor Burek : "with holidays coming, wont be surprised if many lenders worsened all pricing"
Mike Drews : "hmmmm...Chase's 15yr rates are worse than yesterday."
Matthew Graham : "RTRS- U.S. HOUSE SPEAKER BOEHNER SAYS WITHDRAWN VOTE WAS "NOT THE OUTCOME I WANTED" "
Jeff Anderson : "Great. A Boehner news conference in a few minutes. Ughh."
Matthew Graham : "THOMSON REUTERS/U. OF MICH CONSUMER EXPECTATIONS INDEX LOWEST SINCE DECEMBER 2011"
Matthew Graham : "THOMSON REUTERS/U. OF MICH CONSUMER SENTIMENT INDEX LOWEST SINCE JULY "
Matthew Graham : "THOMSON REUTERS/U. OF MICH US CONSUMER SENTIMENT FINAL DECEMBER 72.9 (CONSENSUS 74.7) VS 74.5 PRELIMINARY DECEMBER "
Matthew Graham : "Could be a factor in making the playing field more slippery RK. i.e. less resistance to a slide in one direction or another later in the day. "
Matthew Graham : "bouncing where we've bounced, thus far, is simply looking like a defense of the long term range that we didn't want to break, based in large part on mid-to-late October levels in the low 104's"
Ryan Kelly : "Lower volume going to be good news or bad? Predictions..."
Ryan Kelly : "how much are early x-mas vacations going to affect the MBS market today?"
Jason Anker : "new support levels based on 1-2 months rather than past 2-3 days?"
Jason Anker : "MG where is the long term support assuming we're ou tof the tight 104-16 range now. "
Jeff Anderson : "So the markets telling us a deal was already baked in a little bit?"
Matthew Graham : "RTRS- U.S. NOV DURABLES EX-TRANSPORTATION +1.6 PCT (CONS -0.2 PCT) VS OCT +1.9 PCT (PREV +1.8 PCT) "
Matthew Graham : "RTRS- US NOV DURABLES ORDERS +0.7 PCT (CONSENSUS +0.2 PCT) VS OCT +1.1 PCT (PREV +0.5 PCT) "
Matthew Graham : "RTRS- US NOV REAL CONSUMER SPENDING +0.6 PCT, BIGGEST RISE SINCE AUG 2009, VS OCT -0.2 PCT (PREV -0.3 PCT) "
Matthew Graham : "RTRS- US NOV PERSONAL INCOME +0.6 PCT, BIGGEST RISE SINCE FEB (CONS +0.3 PCT) VS OCT +0.1 PCT (PREV UNCHANGED) "
Matthew Graham : "RTRS - US NOV PERSONAL SPENDING +0.4 PCT (CONSENSUS +0.3 PCT) VS OCT -0.1 PCT (PREV -0.2 PCT) "
Paul L. Martin : "GM gang. Going to be an interesting friday."