Everything was pretty quiet this morning with volume and momentum not really making much of an appearance until the 9:30am opening bell for equities. Before that Treasuries were flat overnight (1.5bp range) and came in the door, along with MBS, almost perfectly unchanged from yesterday's latest levels. Volumes surged at the stock open--nothing earth-shattering, but worlds apart from earlier trading. This suggested some asset-allocation trading out of equities and into bonds. It was well-contained by the range until Consumer Sentiment printed much weaker than expected, leading 10's ultimately lower to test the 2.0 range boundary (short term anyway). They've done a good amount of "testing" with lows of 1.9929, but in general, are still feeling rather sticky around 2.0. Fannie 3.0's are encountering the same stickiness just over 102-20.
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 11:09 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
ECON: Consumer Sentiment Weaker Than Expected
- Headline Sentiment 71.8 vs 78.0 Consensus
- Current Conditions 87.5 vs 87.5 Consensus
- Expectations Index 61.7 vs 68.0
- 12 Month Index 70 vs 87 Consensus
(Reuters) - U.S. consumer sentiment tumbled to its lowest since December 2011 in early March, hit by dissatisfaction with government economic policies and as fewer Americans expected to see improvements in growth or the labor market, a survey released on Friday showed.
The Thomson Reuters/University of Michigan's preliminary reading on the overall index on consumer sentiment dropped to 71.8 from 77.6 in February, short of expectations for 78.
Across-the-board government spending cuts of $85 billion went into effect at the beginning of the month after U.S. lawmakers failed to come to a new deal.
A record 34 percent of respondents made unfavorable references to government economic policies, beating January's prior record of 31 percent.
"The frustrations expressed by consumers essentially involve how little consideration has been given to how the government’s inability to reach a compromise affects people’s economic situation," survey director Richard Curtin said in a statement.
ECON: Industrial Production Higher Than Expected
- Output +0.7 vs +0.4 consensus, 0.0 in Jan
- Capacity Use Rate 79.6 vs 79.3 consensus
- Manufacturing +0.8 vs -0.3 in Jan
- Market Reaction: Little, if any. MBS still unchanged on the day.
Industrial production increased 0.7 percent in February after having been unchanged in January. Manufacturing output rose 0.8 percent in February, and the index revised up for the previous two months. In February, the output of utilities advanced 1.6 percent, as temperatures for the month were near their seasonal norms after two months of unseasonably warm weather. The production at mines declined 0.3 percent, its third consecutive monthly decrease. At 99.5 percent of its 2007 average, total industrial production in February was 2.5 percent above its level of a year earlier. The capacity utilization rate for total industry increased to 79.6 percent, a rate that is 0.6 percentage point below its long-run (1972--2012) average.
Quiet Overnight, Quiet Morning, But Not Without Risks
Keeping in the recently espoused theme of the "post-NFP consolidation" between 2.0 and 2.075 (in terms of 10yr yields), Treasuries had a super sideways and narrow overnight session. The trading range was roughly 1.5 bps between 2.03 and 2.045. The tight range and light volumes bring us that much closer to making it through to next week without major drama, but it is a "quadruple witching"
day, which can create tradeflow-related volatility.
MBS opened up right in line with yesterday's latest levels and has continued to trade fairly tight, between 102-12 and 102-15 through the first two pieces of data this morning. It's not that CPI or Empire State Manufacturing were exceptionally likely to move markets, but their uneventful passing brings us that much closer to the end of the week.
Industrial Production is coming up in 1 minute with Consumer Sentiment following at 9:55am. Bottom line: hoping to hold calmly sideways, but prepared for tradeflow-inspired volatility. It could also come from a big miss or beat in one of the upcoming data sets, which we'll see shortly.
ECON: Core Consumer Prices As Expected
- Headline CPI +0.7 vs +0.5 Consensus
- Core CPI +0.1741 vs +0.2 Consensus
The gasoline index rose 9.1 percent in February to account for almost
three-fourths of the seasonally adjusted all items increase. The
indexes for electricity, natural gas, and fuel oil also increased,
leading to a 5.4 percent rise in the energy index. The food index
increased slightly in February, rising 0.1 percent. A sharp increase
in the fruits and vegetables index was the major cause of the 0.1
percent increase in the food at home index, with other major grocery
store food group indexes mixed.
ECON: Empire State Manufacturing Roughly In Line With Expectations
- 9.24 vs 10.0 Consensus, 10.04 in Feb
- Employment 3.23 vs 8.08 in Feb
- New Orders 8.18 vs 13.31 in Feb
- 6-Month Outlook 36.43 vs 33.07 in Feb
The March 2013
that conditions for New York
manufacturers continued to improve
modestly. The general business
conditions index was positive
for a second consecutive month
and, at 9.2, was little changed.
The new orders and shipments
indexes also remained above zero,
though both were somewhat lower
than last month’s levels. Price
indexes showed that input price
increases continued at a steady
pace while selling prices were flat.
Employment indexes suggested
that labor market conditions were
sluggish, with little change in
employment levels and the length of
the average workweek. Indexes for
the six-month outlook pointed to an
increasing level of optimism about
future conditions, with the future
general business conditions index
rising to its highest level in nearly
In a series of supplementary
questions, firms were asked about
cash holdings, debt levels, and
methods of financing capital
spending. Queried about expected
changes in their outstanding debt
in the year ahead, manufacturers
indicated an increasingly
widespread inclination to take
on more debt. When asked about
anticipated changes in cash
holdings in the year ahead, more
respondents anticipated decreases
than increases—for the first time
since 2008. Manufacturers, on
average, also reported that they
were currently holding less cash
Live Chat Featured Comments
Andrew Horowitz : "last time CPI had an effect was sometime in the early 90's MG ;-)"
Matthew Graham : "First leg up was at the equities open. Big futures volume pops on both sides, making it look like asset-allocation trading and tradeflow-driven vs economic fundamentals. Then economic fundamentals got their turn after Sentiment. The rest of the morning data is pretty inconsequential typically. I don't remember the last time CPI actually had an impact, and IP/CapU beats/misses have to be very big in order to have much of an impact."
B-C : "Mike Ford you can pay"
Mike Ford : "If my branch won't pay for a client's appraisal, can I pay on my credit card? Never run into this before.."
Mike Ford : "MG, in a nutshell why the gains? econ reports would suggest bullish trend continues, yet we see some flight to quality today. Capitulation on equities finally as we hung around sideways at the highs for several days? "
Ross Miller : "This is the link to the House Bill to make changes to fix the 3% calculations for brokers and affiliate relationships: http://www.gpo.gov/fdsys/pkg/BILLS-113hr1077ih/pdf/BILLS-113hr1077ih.pdf"
Matthew Graham : "THOMSON REUTERS/U. OF MICH CONSUMER EXPECTATIONS LOWEST SINCE NOVEMBER 2011 "
Matthew Graham : "THOMSON REUTERS/U. OF MICH CONSUMER SENTIMENT LOWEST SINCE DECEMBER 2011 "
Matthew Graham : "THOMSON REUTERS/U. OF MICH CONSUMER EXPECTATIONS INDEX PRELIM MARCH 61.7 (CONSENSUS 68.0) VS FINAL FEB 70.2 "
Mike Drews : "wow..data in our favor?"
Matthew Graham : "THOMSON REUTERS/U. OF MICH CURRENT CONDITIONS INDEX PRELIM MARCH 87.5 (CONSENSUS 87.5) VS FINAL FEB 89.0 "
Matthew Graham : "THOMSON REUTERS/U. OF MICH US CONSUMER SENTIMENT PRELIMINARY MARCH 71.8 (CONSENSUS 78.0) VS FINAL FEBRUARY 77.6 "
Victor Burek : "that should help"
Matthew Graham : "equities open is our friend right now. clearly the biggest impetus of the session for Treasuries, and extending to MBS"
Tony Cardinal : "I think 104-20 is a strong pivot....."