MBS Live: MBS Morning Market Summary

We haven't been shy about characterizing the potential breakaway from 2+ weeks of sideways range as a "lead off."  In case it needed any explanation, this is the metaphor we use to convey a sort of cautious head-start on anticipated trading direction, just like a runner in baseball might take a lead-off from the base they're currently occupying either to steal the next base, or just be in a better position to run when the ball is hit.  The range of 10yr yields and MBS prices that equate to the current "base" is 1.73-1.67 in 10's and 104-02 to 104-12 in Fannie 3.0 MBS.  The lead-off then, clearly started at the end of last week and continued yesterday.  It was tentative at first but became less so this morning.  Fannie 3.0s ran all the way up to 104-25 and 10's hit 1.638.  This was a bit too much of a lead off.  The metaphorical pitcher turned and our base-runners retreated to their base.  This is easily seen in the following chart of 10yr yields (note the "base" at 1.726 to 1.672 and the progressively larger lead-off leading up to today's new low and quick snap back):

Please note the timestamp in the following price table (11:05am).  This was from before the sell-off that brought MBS back to yesterday's levels.  The MID-DAY recap is occasionally delayed in order to facilitate a reprice alerts for our MBS Live subscribers if they're necessary in the 11am hour, and those reprice alerts will be reflected in the end-of-day "MBS RECAP."   Current prices aren't quite back to these levels.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
104-23 : +0-05
FNMA 3.5
106-20 : +0-03
FNMA 4.0
107-03 : +0-01
FNMA 4.5
107-27 : -0-01
GNMA 3.0
106-16 : +0-07
GNMA 3.5
108-31 : +0-03
GNMA 4.0
109-16 : -0-01
GNMA 4.5
109-03 : -0-01
FHLMC 3.0
104-09 : +0-05
FHLMC 3.5
106-12 : +0-03
FHLMC 4.0
106-26 : +0-02
FHLMC 4.5
107-02 : -0-02
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 this morning.
10:19AM  :  Freddie Launches Online Tool to Flag Data/Credit Issues Before Delivery
Freddie Mac (OTCQB: FMCC) today announced Loan Quality Advisor(SM), a new online loan tool that gives lenders an automated way to identify credit, data and purchase eligibility issues before they deliver loans to Freddie Mac. By helping lenders spot and fix potential problems earlier in the loan manufacturing process, Loan Quality Advisor can make Freddie Mac's purchase requirements more transparent and give lenders greater certainty in the loans they sell to Freddie Mac. Loan Quality Advisor also gives lenders Freddie Mac's view of credit risk on mortgages that were not originated on Loan Prospector®, Freddie Mac's automated underwriting service.

Loan Quality Advisor marks the launch of Freddie Mac's new Greater Purchase Certainty initiative to help lenders improve loan quality while making business with Freddie Mac more efficient and transparent for all Freddie Mac customers.

"Loan Quality Advisor gives lenders fast, transparent feedback they can use to aid their loan manufacturing processes and take fuller advantage of Freddie Mac's new representation and warranties framework. By using Loan Quality Advisor, our customers can enjoy Greater Purchase Certainty when they do business with Freddie Mac. Giving lenders greater certainty and comprehensive support is at the center of Freddie Mac's customer mission."

More details HERE.
10:06AM  :  ECON: Consumer Confidence Rises, But Employment Component Weakens

Headline Consumer Confidence +68.1 vs 60.8 f'cast
'Present Situation' 60.4 vs 59.2 previous
'Jobs Hard To Get' Index 37.1 vs 35.4 previous

Reaction and considerations: The headline is positive but the employment component is still bond market friendly as Fed policy is directly linked to employment data. Also, negative employment metrics provide anecdotal evidence for Friday's NFP.

The Conference Board Consumer Confidence Index®, which had declined in March, increased in April. The Index now stands at 68.1 (1985=100), up from 61.9 in March. The Present Situation Index increased to 60.4 from 59.2. The Expectations Index improved to 73.3 from 63.7 last month.

The monthly Consumer Confidence Survey®, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a leading global provider of information and analytics around what consumers buy and watch. The cutoff date for the preliminary results was April 18.

Says Lynn Franco, Director of Economic Indicators at The Conference Board: “Consumer Confidence improved in April, as consumers’ expectations about the short-term economic outlook and their income prospects improved. However, consumers’ confidence has been challenged several times over the past few months by such events as the fiscal cliff, the payroll tax hike and the sequester. Thus, while expectations appear to have bounced back, it is too soon to tell if confidence is actually on the mend.”
10:00AM  :  ECON: Chicago PMI Weaker Than Expected and QE-Friendly
- PMI 49 vs 52.5 forecast, 52.4 previous
- New Orders 53.2 vs 53.0
- Employment 48.7 vs 44.1 previous, lowest since Dec

Market Reaction: Broadly positive for bond markets, leading to new highs on the day. "QE-Friendly" = growth down, employment down, and "prices paid" were much lower.

The Chicago Purchasing Managers reported April's Chicago Business Barometer fell 3.4 to 49.0, a 3-1/2 year low. Except for a minor gain in New Orders, all Business Activity measures weakened in April with five of seven now in contraction.

BUSINESS ACTIVITY: SUPPLIER DELIVERIES, PRICES PAID, and PRODUCTION: all lowest since 2009;

ORDER BACKLOGS: ten months of contraction in the past 12 months;

EMPLOYMENT: third month over month decline.
9:27AM  :  ECON: Case Shiller Home Prices Slightly Higher Than Expected
- 20 City HPI +0.3 vs +0.2 forecast
- 20 City HPI Year-Over-Year - +9.3 vs +9.0 forecast
- Both 20 and 10 City Year-Over-Year HPI, highest since May 2006

Data through February 2013, released today by S&P Dow Jones Indices for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, showed average home prices increased 8.6% and 9.3% for the 10- and 20-City Composites in the 12 months ending in February 2013.

The 10- and 20-City Composites rose 0.4% and 0.3% from January to February. All 20 cities covered by the indices posted year-over-year increases for at least two consecutive months. In 16 of the 20 cities annual growth rates rose from the last month; Detroit, Miami, Minneapolis and Phoenix saw slight annual deceleration ranging from -0.1 to -0.4 percentage points. Phoenix continued to stand out with an impressive year-over-year return of +23.0% while Atlanta and Dallas had the highest annual growth rates in the history of these indices since 1992 and 2001, respectively.
8:58AM  :  Bond Markets Moderately Improved Overnight; Holding Gains
Overnight trading was pretty mellow for bond markets with 10yr yields starting out just slightly lower than they did last night. The movement was also much less choppy as 10's gently drifted from 1.675 to 1.66 by the 5:30am. A quit bout of buying in German Bunds led 10's as low as 1.65 and there they stayed though this morning's first round of data: the relatively inconsequential Employment Cost Index.

MBS opened up 2 ticks and have added another 2 in Fannie 3.0s to sit at 104-22 currently. These are currently the official highs of the month for April and the very close to 2013 highs (only out-done by 1/3/13). Whatever the case, Treasuries and MBS are both in that "lead-off" territory where each have stepped out noticeably from their previous narrow ranges, but not so much as to prevent reentry if the tide turned.

As the US session continues, it's not the busiest morning of the week, but there are several pieces of data coming up, all in their own time slot. Employment Costs wasn't a mover at 5:30 and wasn't expected to be. Case-Shiller Home Prices coming up at 9am typically don't move the needle much either, but it has happened on occasion. The meatier data hits after the stock market opens with Chicago PMI at 9:45 (look for the pop at 9:42am from the crowd that gets the data early) and Consumer Confidence at 10am.
Live Chat Featured Comments
A recap of the featured comments from the MBS Live Dashboard's Live Chat feature, utilized by hundreds of industry professionals each day.
Matthew Graham  :  "RTRS- U.S. SEASONALLY ADJUSTED HOMEOWNERSHIP RATE SLIPS TO 65.2 PERCENT IN FIRST QUARTER FROM 65.3 PERCENT IN FOURTH QUARTER - U.S. COMMERCE DEPARTMENT "
Matthew Graham  :  "RTRS- US JOBS HARD-TO-GET INDEX 37.1 IN APRIL VS MARCH REVISED 35.4 (PREVIOUS 36.2)--CONFERENCE BOARD "
Matthew Graham  :  "RTRS- US CONSUMER PRESENT SITUATION INDEX IN APRIL 60.4 VS MARCH REVISED 59.2 (PREVIOUS 57.9) "
Matthew Graham  :  "RTRS- US APRIL CONSUMER CONFIDENCE INDEX 68.1 (CONSENSUS 60.8) VS MARCH REVISED 61.9 (PREVIOUS 59.7) - CONFERENCE BOARD "
Matthew Graham  :  "twas a QE-friendly report indeed"
Ted Rood  :  "Fed not gonna be tightening anytime this year, nor even discussing it."
Matthew Graham  :  "first move below 50 on Production Index since 2009"
Andrew Horowitz  :  "below 50 for first time since when MG?"
Matthew Graham  :  "Employment lowest since December, Prices lowest since Oct 2009"
Matthew Graham  :  "RTRS- CHICAGO PMI EMPLOYMENT INDEX 48.7 IN APRIL VS 55.1 IN MARCH "
Matthew Graham  :  "RTRS- CHICAGO PURCHASING MGMT NEW ORDERS INDEX 53.2 IN APRIL VS 53.0 IN MARCH "
Matthew Graham  :  "RTRS- CHICAGO PURCHASING MANAGEMENT INDEX 49.0 IN APRIL (CONSENSUS 52.5) VS 52.4 IN MARCH "
Matthew Graham  :  "yeah, reasonable miss"
Matthew Graham  :  "maybe a miss based on 10's"
Matthew Graham  :  "standby for potential Chi-PMI early pop."
Jason York  :  "I have you beat Chip, my UW was doing her final check before clearing a file for closing, and pulled her final report, and the customer had $17 collection pop up from a power company, dropped his score from a 781 to a 658, and it was done in error!"
Chip Harris  :  "Just pulled credit on a past client. 689 mid score. Recent medical collection for $700. Ran it through Credit Xpert on Credco and that is driving her score down 115 points! WOW! Of course we will get it deleted since it's unpaid, but what a pain in the rear. She has not heard a word on it. These medical collection companies are so damned unethical. "
Matthew Graham  :  "For both 20 and 10 city index, year-over-year increases are the biggest since May 2006."
Matthew Graham  :  "RTRS - US FEB 20-METRO AREA HOME PRICES +9.3 PCT (CONSENSUS +9.0 PCT) FROM YEAR AGO -- CASE-SHILLER "
Matthew Graham  :  "RTRS - US FEB 20-METRO AREA HOME PRICES +0.3 PCT (CONSENSUS +0.2 PCT) VS +0.1 PCT IN JAN-S&P/CASE-SHILLER "
Matthew Graham  :  "RTRS- US FEBRUARY HOME PRICES IN 20 METRO AREAS +1.2 PCT SEASONALLY ADJ (CONSENSUS +0.9 PCT) VS +1.0 PCT IN JAN- S&P/CASE-SHILLER "
Matthew Graham  :  "RTRS - US. Q1 EMPLOYMENT COST INDEX +0.3 PCT, SMALLEST INCREASE SINCE Q3 2011, (CONSENSUS +0.5 PCT) VS Q4 +0.4 PCT (PREV +0.5 PCT)"
B-C  :  "add a single premium at 95% and its a no brainer"
B-C  :  "with FHA mip being so ridiculously high, we will have refi's if rates go to 6%"
Sung Kim  :  "same crap as back in the day, waive appraisal contingency, waive home inspection, give up new born, escalate 100k over a 200k price"
Sung Kim  :  "primary"
Victor Burek  :  "is it people buying primary residences, or investments?"
Sung Kim  :  "i tell you, the resale market around this area (washington metro ex certain MD counties) is starting to be bubblicious"
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