The tone was decidedly weaker earlier in the morning as equities markets rose steadily from 9:40am. Treasuries began the day in significantly stronger territory with MBS not quite keeping pace with the move. Both have done a reasonably good job of holding their ground against a more pronounced move in the stock market. Economic data proved to be of relatively little consequence earlier in the morning despite a big change in the "Income" component of the Incomes/Outlays report due to December vs January issues surrounding the payroll tax holiday. ISM data was more meaningful, coming in slightly stronger than expected and generally lining up with the bounce higher in stocks and bond yields. The weakness looks to have topped out (or bottomed out in terms of MBS Prices) right at 11:00am and we're locked in that narrow sideways range, trying to make it to Monday without sequestration drama.
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 11:05 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
Equities Lead Bounce, MBS At Lows, Negative Reprice Risk?
MBS are down to their lows of the morning as a well-connected stock lever has been leading yields higher in the bond market. 10 yr TSYs rejected yet another move below mid 1.84's, and important long and short term technical resistance level.
Fannie 3.0s are unchanged on the day but down to to 103-19 from 103-24 earlier. Some lenders that priced just before 10am may already be considering negative reprices, but the chances are still small for now, for most lenders.
A break below yesterday's at 103-18 would be more probable reprice territory for lenders that were already out with rate sheets. We're keeping an eye on S&Ps for a break above yesterday's close (1514), and any concomitant reaction in Treasuries as early warning signs of such a move.
ECON: ISM Manufacturing Stronger Than Expected
- ISM Manufacturing PMI 54.2 vs 52.5 Consensus
- Highest Since June 2011
- Employment Index 52.6 vs 54.0 in Jan
- New Orders 57.8 vs 53.3 in Jan
- Highest Since April 2011
Economic activity in the manufacturing sector expanded in February for the third consecutive month, and the overall economy grew for the 45th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.
ECON: Markit Manufacturing PMI Slightly Weaker Than Preliminary Readings
- Markit Manufacturing PMI 54.3 vs 55.2 preliminary reading
- Output 57.3 vs 58.1 prelim.
- New Orders 55.4 vs 56.4 prelim
The expansion of the U.S. manufacturing sector
continued in February, although the rate of growth
eased from January’s nine-month peak. At 54.3,
down from 55.8 in the previous survey period, the
final Markit U.S. Manufacturing Purchasing
Managers’ Index™ was almost a full point below the earlier flash estimate of 55.2 but still
consistent with a solid improvement in overall
Bond Markets Stronger Overnight, Meeting Some AM Resistance
Treasuries improved slightly at the start of the Asian session and weakened even more slightly, never making it back to Thursday afternoon's levels. The throng of EU economic reports was generally positive for German Bunds and US Treasuries though the latter finally met with resistance at the same mid 1.84's that provides the last two bounces of the week. 10's are currently 1.857.
MBS opened 4 ticks higher and have since given one back (+3 on the day at 103-22) as resistance in Treasuries (or is is support in equities futures? Maybe both) kicked in after the Incomes/Outlays report. Markit PMI just hit and was slightly weaker than expected, but no major reaction so far. Next major data at 9:55am with Consumer Sentiment, followed by ISM Manufacturing at 10am.
ECON: Income Down Sharply On Fiscal Cliff Considerations
- Spending +0.2 vs +0.2 Consensus
- Income -3.6 vs -2.2 Consensus, biggest drop since 1993, reflects pumping up of bonuses/dividends in Dec and payroll tax holiday expiration in Jan , hence no pronounced reaction in bond markets or equities futures
Personal income decreased $505.5 billion, or 3.6 percent, and disposable personal income (DPI)
decreased $491.4 billion, or 4.0 percent, in January, according to the Bureau of Economic Analysis.
Personal consumption expenditures (PCE) increased $18.2 billion, or 0.2 percent. In December,
personal income increased $353.4 billion, or 2.6 percent, DPI increased $325.7 billion, or 2.7
percent, and PCE increased $14.8 billion, or 0.1 percent, based on revised estimates.
Personal outlays -- PCE, personal interest payments, and personal current transfer payments -- increased $22.0 billion in January,
compared with an increase of $13.3 billion in December. PCE increased $18.2 billion, compared with an increase of $14.8 billion.
Live Chat Featured Comments
MMNJ : "http://www.marketwatch.com/story/the-return-of-interest-only-mortgages-2013-03-01?siteid=yhoof2"
Matthew Graham : "RTRS- OBAMA, CONGRESSIONAL LEADERS BEGIN MEETING TO DISCUSS LOOMING AUTOMATIC BUDGET CUTS "
Ted Rood : "Cloudy here but it appears sun rose despite the draconican sequester cuts today."
Tim Mitchell : "Jason i took an app for a lady that had gotten a loan from Taylor Bean in their last month in business, TBW never forwarded the UPMIP premium to Ginnie, so she can't refy because she's upside down "
Matthew Graham : "RTRS - ISM U.S. MANUFACTURING NEW ORDERS INDEX 57.8 IN FEBRUARY VS 53.3 IN JAN "
Jason York : "man it sucks getting calls from new customers that you can't do anything for, and you can tell that they had gotten shafted on their last mortgage"
Matthew Graham : "RTRS - ISM U.S. MANUFACTURING PRICES PAID INDEX 61.5 IN FEBRUARY (CONSENSUS 57.0) VS 56.5 IN JAN "
Ted Rood : "Gotta be that personal income drop helping boost sentiment."
Matthew Graham : "THOMSON REUTERS/U. OF MICH CURRENT CONDITIONS INDEX FINAL FEB 89.0 (CONSENSUS 88.0) VS PRELIMINARY FEB 88.0 "
Matthew Graham : "THOMSON REUTERS/U. OF MICH US CONSUMER SENTIMENT FINAL FEBRUARY 77.6 (CONSENSUS 76.3) VS PRELIMINARY FEB 76.3 "
Matthew Graham : "RTRS - MARKIT U.S. MANUFACTURING SECTOR FINAL PMI FOR FEBRUARY AT 54.3 VS FLASH READING 55.2 AND 55.8 IN JANUARY"
Matthew Graham : "yes includes. many paychecks in Jan docked (maybe all? I just know that people in here were talking about it halfway through Jan as first paychecks started hitting)."
Victor Burek : "does this data include the end of payroll tax? or was that not felt til feb?"
Matthew Graham : "yeah reasons for Dec to get pushed higher and Jan to get pushed lower. I think it's all cliff-related enough that it's not causing much of a stir. Previous low this week in 10's is 1.8434. "
Victor Burek : "dividend income fell 35% in jan Jeff..bloomberg just talking about that"
Matthew Graham : "RTRS- US JAN YEAR-OVER-YEAR PCE PRICE INDEX RISE SMALLEST SINCE OCT 2009, CORE PCE RISE SMALLEST SINCE APRIL 2011 "
Scott Valins : "hence the pop in debt number yesterday"
Jeff Anderson : "Isn't some of the income decrease from all the bonuses paid in Dec to beat the tax increases?"
Matthew Graham : "RTRS- US JAN PERSONAL SAVING RATE 2.4 PCT, LOWEST SINCE NOV 2007, VS DEC 6.4 PCT "
Matthew Graham : "RTRS - US JAN PERSONAL INCOME -3.6 PCT, LARGEST DROP SINCE JAN 1993, (CONS -2.2 PCT) VS DEC +2.6 PCT (PREV +2.6 PCT) "
Matthew Graham : "RTRS - US JAN PERSONAL SPENDING +0.2 PCT (CONSENSUS +0.2 PCT) VS DEC +0.1 PCT (PREV +0.2 PCT) "
Victor Burek : "so lockign today will be based on how generous lenders are this morning with pricing"
Victor Burek : "agree, any talk of kicking can on cuts could mean a bad monday"
Victor Burek : "this might be one of those fridays when locking might make sense"
Brayden Alexander : "VB has a firm "no Friday lock" rules, unless it is a good price level to lock at. It is highly scientific. "
B-C : "high Italy unemployment"
Matt Hodges : "i believe this Friday will be a good day to lock.... don't tell Victor"
Thomas Quann : "1.85 and going down......"