The 30yr Bond Auction is coming up at 1pm, and while it's Treasuries that are being auctioned, the extra supply in the market has a moderate ripple effect for MBS. This looks to be rearing it's moderately unattractive head heading into the 11am hour as bond markets only manage a tepid bounce back after hitting lows of the day at 10am. Those lows themselves were a product of this morning's stronger-than-expected Jobless Claims report and took MBS from 104-05 highs back down to 104-00. There was some minor additional weakness between 9 and 10am before the aforementioned tepid bounce attempt. In other words, MBS and Treasuries likely would have been willing to head back closer to yesterday's highs if it weren't for the looming need to "make room" for $16 bln in new Treasury supply. Dollars that must inevitably be bid on 30's are dollars that could otherwise go somewhere else in the fixed-income world, thus implying some small headwinds for prices. Of course markets are aware of such things well in advance, but there's always a bit of lingering uncertainty surrounding the auctions and how their awards will ultimately be doled out.
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Pricing as of 11:06 AM EST
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Freddie Mac PMMS: Mortgage Rates Edge Higher
MCLEAN, VA--(Marketwired - May 9, 2013) - Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey(R) (PMMS®), showing average fixed mortgage rates reversing their recent trend and moving higher for the first time in six weeks amid April's better than expected employment report.
- 30-year fixed-rate mortgage (FRM) averaged 3.42 percent with an average 0.7 point for the week ending May 9, 2013, up from last week when it averaged 3.35 percent. Last year at this time, the 30-year FRM averaged 3.83 percent.
- 15-year FRM this week averaged 2.61 percent with an average 0.7 point, up from last week when it averaged 2.56 percent. A year ago at this time, the 15-year FRM averaged 3.05 percent.
- 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.58 percent this week with an average 0.5 point, up from last week when it averaged 2.56 percent. A year ago, the 5-year ARM averaged 2.81 percent.
- 1-year Treasury-indexed ARM averaged 2.53 percent this week with an average 0.4 point, down from last week when it averaged 2.56 percent. At this time last year, the 1-year ARM averaged 2.73 percent.
Frank Nothaft, vice president and chief economist, Freddie Mac:
"Fixed mortgage rates edged up following a solid employment report for April. The economy gained 165,000 new jobs on net last month, more than the market consensus forecast and the largest monthly increase this year. On top of that, revisions added 114,000 more jobs to February and March as well. All of these factors allowed the unemployment rate to fall to 7.5 percent in April, the lowest since December 2008."
ECON: Wholesale Sales Weakest Since March 09, and No One Cares
- Inventories +0.4 vs +0.3 consensus
- Sales -1.6 vs +0.1 consensus, biggest drops since 3/09
- Market Reaction: Microscopic pull-back in stocks and that's about it. It's already bounce more than half-way back. Moving on...
The U.S. Census Bureau announced today that March 2013 sales of merchant wholesalers, except manufacturers’ sales branches and offices,
after adjustment for seasonal variations and trading-day differences but not for price changes, were $414.7 billion, down 1.6 percent (+/-0.4%) from
the revised February level, but were up 1.3 percent (+/-1.1%) from the March 2012 level. The February preliminary estimate was revised downward
$0.9 billion or 0.2 percent. March sales of durable goods were down 0.6 percent (+/-0.9%)* from last month, but were up 1.7 percent (+/-1.2%) from
a year ago. Sales of metals and minerals, except petroleum, were down 2.5 percent from last month. Sales of nondurable goods were down 2.5
percent (+/-0.9%) from February, but were up 1.0 percent (+/-1.2%)* from last March. Sales of petroleum and petroleum products were down 7.5
percent from last month and sales of apparel, piece goods, and notions were down 5.5 percent.
Total inventories of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations
but not for price changes, were $503.1 billion at the end of March, up 0.4 percent (+/-0.4%)* from the revised February level and were up 4.7 percent
(+/-1.2%) from the March 2012 level. The February preliminary estimate was revised downward $0.1 billion. March inventories of durable goods
were up 0.5 percent (+/-0.4%) from last month and were up 7.2 percent (+/-1.4%) from a year ago. Inventories of hardware, and plumbing and
heating equipment and supplies were up 2.1 percent from last month and inventories of motor vehicle and motor vehicle parts and supplies were up
1.2 percent. Inventories of nondurable goods were up 0.1 percent (+/-0.5%)* from February and were up 1.2 percent (+/-1.4%)* from last March.
Inventories of apparel, piece goods, and notions were up 1.7 percent from last month, while inventories of petroleum and petroleum products were
down 3.4 percent
MBS Turn Negative Following Protracted Post-Claims Slide
The selling wasn't especially quick or severe, but MBS are now back into negative territory on the day, even if only by 2 ticks, bringing Fannie 3.0s to 103-31. This marks a fairly steady decline from 104-05 highs earlier this morning.
Treasuries were broadly improved overnight as was volume, despite some European holiday absences. Spanish debt auctions were strong, but yields moved paradoxically higher. Weakness in peripheral sovereigns tends to connote strength for Germany and Friends, and German 10yr Bunds have few closer friends than US 10's.
The latter moved lower at its quickest pace of the night in concert with the post-Spain-Auction rally in German debt, before hitting resistance at 1.781 both at 6am and 8am New York time. Stronger-than-expected Jobless Claims data not only reinforced the resistance, but kicked off a slow motion sell-off that has now taken MBS and TSYs into negative territory.
10's are up to 1.8083, just barely into negative territory vs yesterday's newly created (by the Treasury refunding auction) batch of 10's. Fannie 3.0s. Like MBS, the decline was more 'slow and steady' following claims, and keeping a decent amount of pace with advancing equities futures which have since given way to cash trading that's almost made it back to yesterday's closing levels (to be clear, we're talking about a very small loss of 2 points overnight and a 1.5 point bounce back since 9:30.
ECON: Jobless Claims Lower Than Expected
- Claims 323k vs 335k forecast, 327k previously
- 4-week average 336.750, lowest since Nov 07
- Continued Claims 3.006 mln, lowest since May 2008
In the week ending May 4, the advance figure for seasonally adjusted initial claims was 323,000, a decrease of 4,000 from the previous week's revised figure of 327,000. The 4-week moving average was 336,750, a decrease of 6,250 from the previous week's revised average of 343,000.
The advance seasonally adjusted insured unemployment rate was 2.3 percent for the week ending April 27, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending April 27 was 3,005,000, a decrease of 27,000 from the preceding week's revised level of 3,032,000. The 4-week moving average was 3,034,250, a decrease of 24,500 from the preceding week's revised average of 3,058,750.
Live Chat Featured Comments
Matthew Graham : "RTRS- U.S. MARCH WHOLESALE SALES -1.6 PCT, LARGEST DROP SINCE MARCH 2009, (CONSENSUS +0.1 PCT) VS FEB +1.5 PCT (PREV +1.7 PCT)"
Matthew Graham : "RTRS - U.S. MARCH WHOLESALE INVENTORIES +0.4 PCT (CONSENSUS +0.3 PCT) VS FEB -0.3 PCT (PREV -0.3 PCT) "
Matthew Graham : "RTRS- FEDERAL NATIONAL MORTGAGE ASSOCIATION FNMA.OB UP 7.7 PCT IN PREMARKET TRADE ON NEWS OF PAYMENT TO U.S. TREASURY "
Matthew Graham : "unless they're MBSLive/MND readers. (Well I guess our competitors will cover it as well since they're all members here too)"
Andy Pada : "loan officers and borrowers who track the 10 YR are going to feel bummed this morning."
Steven Stone : "Matthew Graham
: 10's sorta roll, but once every 3 months, and a new coupon is determined by the auction "
Steven Stone : "yep"
Andy Pada : "post auction?"
Andy Pada : "new coupon?"
Steven Stone : "new coupon yesterday AP"
Andy Pada : "have we determined the reason for the increased yield in the 10 YR? Market shrugging off claims #?"
William McLeod : "I'm not familiar with the 30% rule for income. It's never come up on past loans with this source."
MMNJ : "But if the income is >30% does that still apply? Just went through this with a client. Just completed 12 months in March so closed refi in April"
Matthew Graham : "RTRS- US CONTINUED CLAIMS FELL TO 3.005 MLN, LOWEST SINCE MAY 2008, (CONS. 3.020 MLN) APRIL 27 WEEK FROM 3.032 MLN PRIOR WEEK (PREV 3.019 MLN) "
Matthew Graham : "RTRS- US JOBLESS CLAIMS FELL TO 323,000 MAY 4 WEEK, LOWEST SINCE JAN 2008, (CONSENSUS 335,000) FROM 327,000 PRIOR WEEK (PREVIOUS 324,000) "
William McLeod : "MM, fannie requires 6 mo's receipt of the income and proof of continuance for 3 yrs"
MMNJ : "MM, I believe if the child support is >30% of her income, then you need to wait for 12 months of history"