As expected, Thursday has proven to be the first real trading day of the week. Those expectations were due to the fact that it's the first day of the week where politicians would be back in Washington, liable to be churning out potentially market-moving Fiscal Cliff headlines. And though there was a moderately busy economic data calendar this morning, it was a Cliff-related headline from Senate Majority Leader Reid that sent bond markets into their best territory in two weeks and stocks to their lowest levels since before the Employment report on December 7th. The Fed completed a round of scheduled "Twist" buying at 11am, but rather than bounce back into weaker territory (as is often the case following Twist buying), bond markets have been more keen to follow the broader risk-off trade, maintaining gains thanks to stock selling.
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Morning Reprice Alerts and Updates
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MBS Surge To Best Levels After Data, But Not Because Of It
Sneaky Fiscal Cliff headlines... coincidentally popping up within 1 minute of the 10am economic data. While the Consumer Confidence numbers were substantially weaker-than-expected, they weren't the culprit of the biggest surge in volume and volatility since last Friday. That honor was already reserved for the first Fiscal Cliff headline of the week.
In today's case, it's Senate Majority Leader Harry Reid saying that going over the Fiscal Cliff "Looks like where we're headed." Doesn't sound like much, perhaps, but it's the "first impression" for the last few days of Fiscal Cliff deal-making potential. Whether or not it's posturing or honest sentiment, we can't be sure, but it has certainly turned markets into a stirring creature for the first time this week.
Fannie 3.0s are up 6 ticks since the news, also up 6 ticks on the day at 104-28. 10yr yields dropped from 1.755 to 1.722 in short order and S&P's are off a quick 8-9 points.
For most lenders, this is too early in the day for a positive reprice, not to mention too emotional a move. There's an outside possibility for positive reprices among lenders who priced before 10am IF current gains demonstrate firm staying power. Still too early to assume that will be the case. The more important point is this: we have our first market-moving headline of the week and negative reprice risk is non-existent at the moment.
ECON: Consumer Confidence Weaker Than Expected
- Headline Confidence down to 65.1 vs 70.0 forecast
- Previous month revised to 71.5 from 73.7
- "Present Situation" ROSE to 62.8 from 57.4
- "Expectations" FELL sharply to 66.5 from 80.9
- Previous Month's "Expectations" revised down from 85.1
- "Present situation" highest since August 2008
- "Expectations" Lowest Since Nov 2011
ECON: New Home Sales In Line With Expectations
- 377k vs 378k Consensus
- Highest Since April 2010
- 4.7 Months Supply vs 4.9 Previously
Sales of new single-family houses in November 2012 were at a seasonally adjusted annual rate of 377,000, according to
estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.
This is 4.4 percent (±16.8%)* above the revised October rate of 361,000 and is 15.3 percent (±18.7%)* above the
November 2011 estimate of 327,000.
The median sales price of new houses sold in November 2012 was $246,200; the average sales price was $299,700. The
seasonally adjusted estimate of new houses for sale at the end of November was 149,000. This represents a supply of 4.7
months at the current sales rate.
MBS Battle Back To Positive Territory After Opening Weaker
In the absence of meaningful inspiration, Treasuries drifted inconsequentially higher in yield overnight. The weakest levels were seen just before the domestic open and perfectly matched yesterday's overnight yield highs at 1.783 in 10yr Notes. Both Treasuries and MBS were already recovering by the time 8am rolled around, and were already bouncing by the time the slightly stronger-than-expected Jobless Claims data printed at 8:30am.
In other words, the Claims data didn't "stop a rally." Not only did the Labor Department note that Claims were estimated in 19 states due to the holiday, but this simply isn't the data that markets are looking for. Indeed it's time again for everyone's favorite holiday game: Fiscal Cliff headline potential!
Political leaders are back in Washington today and it just wouldn't be late December 2012 if we couldn't look forward to SOMETHING being said to inform markets' collective level of hope that a Fiscal Cliff deal--even if merely a stop-gap--is achievable before the New Year. This eventuality should be good for the most concerted movement of the week, provided that it's not one of those foregone conclusion-type headlines.
Nothing to report on that front, yet, and more expectation than guarantee that we'll even get anything actionable (but it would seem like a violation of common courtesy for Congress and the President to be back at work today without tossing at least a nugget or two toward the begrudgingly eager audience).
Until then, bond market trading seems predisposed to more of a sideways grind than a directional mission. MBS just ticked into positive territory for the first time this morning (104-23 in Fannie 3.0s), after having been as low as 104-19 earlier. 10yr yields are close to their lowest levels of the morning, currently trying to break lower past 1.765. Stocks are similarly trying to break their lows of the morning with the analogous level for S&P futures being 1415.
The next scheduled data of the morning will be the Consumer Confidence report at 10am followed by scheduled Fed Twist buying from 10:15 to 11:00am. Neither of these hold a candle to any meaningful Cliff headlines, but in the absence of the latter, could have a small, but detectable impact.
ECON: Jobless Claims Slightly Lower Than Expected
- Claims 350k vs 360k Consensus
- 4-week average lowest since March 2008
- Labor dept says Claims estimated in 19 states due to holiday
In the week ending December 22, the advance figure for seasonally adjusted initial claims was 350,000, a decrease of 12,000 from the previous week's revised figure of 362,000. The 4-week moving average was 356,750, a decrease of 11,250 from the previous week's revised average of 368,000.
The advance seasonally adjusted insured unemployment rate was 2.5 percent for the week ending December 15, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending December 15 was 3,206,000, a decrease of 32,000 from the preceding week's revised level of 3,238,000. The 4-week moving average was 3,219,000, a decrease of 24,750 from the preceding week's revised average of 3,243,750.
Live Chat Featured Comments
Matthew Graham : "RTRS- WHITE HOUSE-OBAMA MADE PHONE CALLS ON WEDNESDAY FROM HAWAII TO CONGRESSIONAL LEADERS REID, BOEHNER, MCCONNELL, PELOSI "
Victor Burek : "this is not the republicans fault or the dems fault...both parties are to blame"
Victor Burek : "great way to bring the country together"
Jay Rafuse : "Harry Reid is on his partisan high horse again"
Paul L. Martin : "Buckle up!"
Matthew Graham : "RTRS- U.S. SENATE MAJORITY LEADER HARRY REID SAYS GOING OVER FISCAL CLIFF "LOOKS LIKE WHERE WE'RE HEADED" "
Matthew Graham : "RTRS- US NOV SINGLE-FAMILY HOME SALES 377,000 UNIT ANN. RATE, HIGHEST SINCE APRIL 2010, (CONS 378,000) VS OCT 361,000 (PREV 368,000) "
Matthew Graham : "Home sales almost exactly as-expected:"
Matthew Graham : "RTRS - PRESENT SITUATION INDEX AT HIGHEST SINCE AUGUST 2008, EXPECTATIONS INDEX AT LOWEST SINCE NOVEMBER 2011 "
Matthew Graham : "RTRS - PRESENT SITUATION INDEX IN DEC 62.8 VS NOV REVISED 57.4 "
Matthew Graham : "RTRS- US CONSUMER EXPECTATIONS INDEX 66.5 IN DEC VS NOV REVISED 80.9 (PREVIOUS 85.1) - CONFERENCE BOARD "
Matthew Graham : "RTRS- US DECEMBER CONSUMER CONFIDENCE INDEX 65.1 (CONSENSUS 70.0) VS NOVEMBER REVISED 71.5 (PREVIOUS 73.7) - CONFERENCE BOARD "
Matthew Graham : "RTRS - US LABOR DEPT OFFICIAL SAYS NEW JOBLESS CLAIMS IN 19 STATES WERE ESTIMATED DUE TO HOLIDAY "
Matthew Graham : "RTRS - US JOBLESS CLAIMS 4-WK AVG FALL TO 356,750 DEC 22 WEEK, LOWEST SINCE MARCH 2008, FROM 368,000 PRIOR WEEK (PREVIOUS 367,750) "
Matthew Graham : "RTRS - US JOBLESS CLAIMS FALL TO 350,000 DEC 22 WEEK (CONSENSUS 360,000) FROM 362,000 PRIOR WEEK (PREVIOUS 361,000) "