The resistance theme mentioned yesterday and today
continue to play out today, as has the headline "More Data, More Opportunity To Ignore It." The resistance was evident from the outset overnight as Treasuries continued correcting from yesterday afternoon's headline-driven yield lows. That was a measured process in the Asian session, but grew more volatile and more negative for bond markets in the European session. US hours had several pieces of economic data to digest, including Housing Starts, the Consumer Price Index, and Industrial Production, but none of them inspired a marked reaction. The push higher in yields had run its course by 8:09am, before any of the data, and has very slowly ebbed back in friendlier directions since then. For MBS, it's been a directional rally from the outset as Fannie 3.0s began the day at 104-02, moving steadily higher to 104-07 currently. To keep the outlook balanced, or perhaps to provide a glimmer of hope, it's fair to say that "support" (by way of a short term ceiling at 1.733, 10yr yield) has entered the scene as a potential foil for the prevalent "resistance" (more of a moving target beginning at 1.699, but well-developed long-term at 1.673). We were treated to several tradeflow-motivated bounces at 1.733 earlier this morning and that's a tight enough range to simply wait to see which breaks first for our next cue.
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 11:04 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
ECON: Industrial Output Stronger Than Expected
- Industrial Output +0.4 vs +0.2 consensus
- Capacity Use Rate 78.5 vs 78.4 consensus
- Market reaction: none.
Industrial production rose 0.4 percent in March after having increased 1.1 percent in February. For the first quarter as a whole, output moved up at an annual rate of 5.0 percent, its largest gain since the first quarter of 2012. Manufacturing output edged down 0.1 percent in March after having risen 0.9 percent in February; the index advanced at an annual rate of 5.3 percent in the first quarter. Production at mines decreased 0.2 percent in March and edged down in the first quarter. In March, the output of utilities jumped 5.3 percent, as unusually cold weather drove up heating demand. At 99.5 percent of its 2007 average, total industrial production in March was 3.5 percent above its year-earlier level. The rate of capacity utilization for total industry moved up in March to 78.5 percent, a rate that is 1.2 percentage points above its level of a year earlier but 1.7 percentage points below its long-run (1972--2012) average.
Bonds Weaker Overnight, But Holding Ground In Domestic Trade
The flight-to-safety bond buying and stock selling associated with yesterday afternoon's headlines was made apparent right from the outset of the overnight session as both sides of the market steadily ground back in the other direction. US equities marched to their own beat, outperforming most global indexes, a further sign that the move is an unwinding of yesterday afternoon's volatility.
This was more docile during Asian trading hours but volatility picked up at the onset of the European session. After a weaker-than-expected ZEW sentiment survey in Germany, Bunds (Europe's 10yr benchmark) paradoxically moved higher in yield. EU equities were less paradoxical--moving lower and applying pressure to the slow and steady rally in S&P futures.
Markets hit domestic shores with Treasuries several bps higher in yield from Monday's close and equities several points higher (though still nearly 20 S&P points lower than Monday's open). As expected, data fell on deaf ears as Housing Starts, CPI, and Industrial Production all failed to produce any meaningful movement.
The theme of "resistance" continues in force as MBS trade under their important band of resistance (from 104-07 to 104-10) currently down 5 ticks on the day at 104-04. 10yr yields are up 4bps from 5pm levels at 1.7275. There are no further economic reports, but several Fed speakers this afternoon. Chicago Fed's Evans is speaking currently and so is ECB Pres Draghi. The latter is the primary source of near term market moving headlines though tradeflows and technicals rule the roost until/unless ousted by a big enough headline.
ECON: Consumer Prices Slightly Lower Than Expected
- CPI -0.1847 vs 0.0 consensus
- Core CPI +0.1058 vs +.2 consensus
The Consumer Price Index for All Urban Consumers (CPI-U) decreased
0.2 percent in March on a seasonally adjusted basis, the U.S. Bureau
of Labor Statistics reported today. Over the last 12 months, the all
items index increased 1.5 percent before seasonal adjustment.
The all items seasonally adjusted decrease was primarily due to a 4.4
percent decline in the gasoline index. The indexes for electricity
and fuel oil declined as well, as the energy index fell 2.6 percent
in March after a 5.4 percent increase in February. The food index was
unchanged in March, with the index for food at home declining
The index for all items less food and energy increased 0.1 percent in
March, after a 0.2 percent increase in February. The indexes for
shelter, used cars and trucks, medical care, personal care, and
airline fares all rose in March. These increases more than offset
declines in the indexes for apparel, household furnishings and
operations, and tobacco.
ECON: Multifamily Leads Housing Starts Higher
- Total Housing Starts 1.036 mln vs 930k Consensus
- Feb revised from 917k to 968k
- Single Fam -4.8, multi-fam +31.1
- Permits 902k vs 940k consensus
Market Reaction: Initial pop weaker for MBS/Treasuries, likely on the headline shock value of a 1 mln+ top line, but now tempered by internals, both sides of the market back toward opening levels.
Privately-owned housing units authorized by building permits in March were at a seasonally adjusted annual rate of 902,000. This is
3.9 percent (±0.9%) below the revised February rate of 939,000, but is 17.3 percent (±1.4%) above the March 2012 estimate of
Single-family authorizations in March were at a rate of 595,000; this is 0.5 percent (±0.7%)* below the revised February figure of
598,000. Authorizations of units in buildings with five units or more were at a rate of 283,000 in March.
Privately-owned housing starts in March were at a seasonally adjusted annual rate of 1,036,000. This is 7.0 percent (±11.8%)* above
the revised February estimate of 968,000 and is 46.7 percent (±13.9%) above the March 2012 rate of 706,000.
Single-family housing starts in March were at a rate of 619,000; this is 4.8 percent (±10.8%)* below the revised February figure of
650,000. The March rate for units in buildings with five units or more was 392,000.
Privately-owned housing completions in March were at a seasonally adjusted annual rate of 800,000. This is 11.0 percent (±20.6%)*
above the revised February estimate of 721,000 and is 36.3 percent (±23.3%) above the March 2012 rate of 587,000.
Single-family housing completions in March were at a rate of 593,000; this is 2.6 percent (±13.1%)* above the revised February rate of
578,000. The March rate for units in buildings with five units or more was 202,000.
Live Chat Featured Comments
Matthew Graham : "RTRS- FED'S EVANS: 'ENTIRELY POSSIBLE' THAT FED COULD START TO TRIM BOND BUYING BY END OF 2013, BUT EARLY 2014 MORE LIKELY "
John Tassios : "Tim, you need copy of original NOTE to show UW that the original borrower was on the initial NOTE"
John Tassios : "Tim, you can add 1 borrower on there / The original borrower on the Note, has to be the main borrower and the add-on borrower be the co-borrower / document this to the underwriter when you turn in the file and make sure on your findings, that the code for HARP2 is still there in the findings report "
Tim Mitchell : "my client is refinancing a rental on HARP2 and wants to add a new spouse to the note, is that possible?"
Victor Burek : "IMF cuts global growth outlook"
Matthew Graham : "Think the reaction was to this though: RTRS- US MARCH HOUSING STARTS 1,036,000 UNIT RATE (CONSENSUS 930,000) VS FEB 968,000 (PREV 917,000)"
Matthew Graham : "RTRS- US MARCH SINGLE-FAMILY STARTS -4.8 PCT TO 619,000 UNIT RATE; MULTIFAMILY +31.1 PCT TO 417,000 UNIT RATE"
Matthew Graham : "RTRS - U.S. MARCH CPI YEAR-OVER-YEAR +1.5 PCT (CONS +1.6 PCT), EXFOOD/ENERGY +1.9 PCT (CONS +2.0 PCT) "
Matthew Graham : "RTRS- U.S. MARCH CPI -0.2 PCT (-0.1847; CONSENSUS UNCHANGED), EXFOOD/ENERGY +0.1 PCT (+0.1058; CONS +0.2 PCT) "
John Tassios : "Bonds and MBS have made a good 2 week run, they are due for a short term pullback and some profit taking may be going on along with better stock and gold futures this morning"
Christopher Stevens : "GM all. Looks like the 10YR just wants to stay in the saftey of that long term trend MG pointed out this morning."
Oliver S. Orlicki : "Ugly start. I agree JA. On the bottom of the range. Hope we don't pop up."
Jeff Anderson : "GM, all. Good Day MG. Don't be complacent at these levels people."