MBS Live: MBS Morning Market Summary
Mortgage markets are less than thrilled with the broader move into higher rates that was effectively confirmed yesterday, and we have 2 negative reprice alerts on MBS Live, early in the session to show for it.  Although Fannie 3.0s managed to open in the green, it was only a byproduct of a resounding rally in Treasuries overnight from 2.06+ to 1.96 by 4:30am New York time.  From then on out, Treasuries leaked higher in yield into Jobless Claims.  MBS were dipped briefly into negative territory, but managed to "fade" the Claims data (FADE: jargon for trading in such a way that runs counter to the conventionally accepted suggestion of the data), but only for so long before stronger home sales data and the Fed's Treasury buying operation (which proved difficult to digest) sent everything back in the other direction, continuing the broader trend of weakness that began overnight.  In other words, a swing and a miss for bond markets in general, but MBS have been much harder hit than Treasuries.  Spreads (MBS yields vs TSY yields) have ballooned to their widest levels since QE3!  Whether or not that should come as a surprise the day after Bernanke and Minutes confirm impending risks of tapering is a matter of debate.
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
101-16 : -0-07
FNMA 3.5
104-15 : -0-06
FNMA 4.0
105-31 : -0-02
FNMA 4.5
107-03 : -0-01
GNMA 3.0
102-26 : -0-06
GNMA 3.5
106-12 : -0-04
GNMA 4.0
107-05 : -0-05
GNMA 4.5
107-13 : -0-01
FHLMC 3.0
101-03 : -0-07
FHLMC 3.5
104-08 : -0-06
FHLMC 4.0
105-23 : -0-03
FHLMC 4.5
106-08 : +0-01
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 this morning.
11:07AM  :  ALERT ISSUED: Negative Reprice Risk Increases Again. More Serious
MBS are down another quick few ticks after the Fed's POMO results with Fannie 3.0s off 7 on the day now to 101-16. Treasuries just broke their higher of the day with 10's moving to 2.043. Negative reprices are now probable vs "possible" previously.
10:12AM  :  ALERT ISSUED: MBS Hit Lows After Home Sales. Negative Reprice Risk Already
It was only a minor beat for the just-released New Home Sales report, but MBS are now down a tick on the day at 101-20. 10yr yields are up a quick 2bps since the report to 2.025 and for lenders that priced at an inopportune time near the highs of the day, reprice risk is potentially already a factor. So that's pretty much any lender who was already out with pricing before now.
10:06AM  :  ECON: New Home Sales Higher Than Expected
- Annual Rate 454k vs 425k consensus
- +2.3 pct vs March +3.5 pct
- Median Price a record $271,600, +14.9% Year over Year
- Inventory at 156k, highest since Oct 2011

Sales of new single-family houses in April 2013 were at a seasonally adjusted annual rate of 454,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 2.3 percent (±12.8%)* above the revised March rate of 444,000 and is 29.0 percent (±20.7%) above the April 2012 estimate of 352,000.

The median sales price of new houses sold in April 2013 was $271,600; the average sales price was $330,800. The seasonally adjusted estimate of new houses for sale at the end of April was 156,000. This represents a supply of 4.1 months at the current sales rate.
9:09AM  :  MBS Turning Positive, Underperforming Treasuries
10yr Treasuries started the overnight session popping higher in yield into the 2.06's as the Yen and JGBs (Japanese Government Bonds) sold off. That changed at about 9:40pm after Chinese PMI unexpectedly turned contractionary. JGB yields began to fall in earnest at 11:40pm but US TSYs stayed more connected to USD/JPY (dollar/yen), which fell from over 103 to under 101 by 5am, ushering in a 7%+ decline in the Nikkei and triggering a temporary shut-down of equities futures.

Treasuries rallied all the way to 1.965 by 4:30am and have been grinding higher since then, popping slightly higher after this morning's Jobless Claims data to 2.033. Data shook up MBS as well, which had already opened in the red, and significantly underperforming Treasuries. We managed to get a friendly post-data bounce after initial weakness and 10's are now back under 2.0 while Fannie 3.0s are up 4 ticks to 101-26.

The only remaining scheduled data this morning is New Home Sales at 10am. For the 11 ticks that Treasuries are in the green, MBS being up only 4 ticks is some of the better relative performance of the morning. MBS should be able to close some of that gap the more we hold 2% as a ceiling in 10s, or fingers crossed, improve upon it.
8:37AM  :  ECON: Jobless Claims Slightly Stronger Than Expected
- Claims 340k vs 345k Consensus, 363k Previous
- 4-wk average 339.5k vs 340k previously
- Continued Claims 2.912 mln vs 3.0 mln f'cast
- Cont'd claims lowest since March 2008

- Market Reaction: down several ticks in MBS and up 1.5 bps in 10s

In the week ending May 18, the advance figure for seasonally adjusted initial claims was 340,000, a decrease of 23,000 from the previous week's revised figure of 363,000. The 4-week moving average was 339,500, a decrease of 500 from the previous week's revised average of 340,000.

The advance seasonally adjusted insured unemployment rate was 2.3 percent for the week ending May 11, unchanged from the prior week's revised rate. The advance number for seasonally adjusted insured unemployment during the week ending May 11 was 2,912,000, a decrease of 112,000 from the preceding week's revised level of 3,024,000. The 4-week moving average was 2,995,250, a decrease of 23,750 from the preceding week's revised average of 3,019,000.
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  :  "I think he wanted the 'why' behind the widening, which would simply be the same old duration shedding theme that goes hand in hand with 10yr yields running up to and over 2%. Every time that happens, 3.0s have gotten queasy and 3.5's to a lesser extent (3.5s are down more today, but over 2 days, 3.0s are the biggest loser). If you've seen me write about 'getting left on the island,' it's kind of like that. 3.0's see 10yr yields around 2% and it's like the big boat weighing anchor after visit"
John Tassios  :  "Mark, The spreads between TSY's and MBS is widening, that is why underperforming / it has been like this for a while through most of 2013"
Mark Gordon  :  "Why are we underperforming treasuries?"
Matthew Graham  :  "so, I guess that's not really promising for any other reason than being green and that might change shortly"
Jason Anker  :  "i'll be happy if the floor holds"
Matthew Graham  :  "CS, that's what I'm HOPING for, but not really leaning in one direction or another. Things are promising so far today, but not as promising as they would be if we'd seen more forceful value buying at the recent lows."
Bert Swyers  :  "no its on for 5 years minimum"
Jeff Weaver  :  "does monthly mi drop for FHA with 20% down?"
Matthew Graham  :  "RTRS- US HOMES FOR SALE AT END OF APRIL 156,000 UNITS, HIGHEST SINCE OCT 2011, VS MARCH 151,000 UNITS "
Matthew Graham  :  "RTRS- US APRIL SINGLE-FAMILY HOME SALES +2.3 PCT VS MARCH +3.5 PCT (PREV +1.5 PCT) "
Oliver S. Orlicki  :  "new homes sales better"
Andrew Horowitz  :  "After yesterday expect volatility CS"
Matthew Graham  :  "RTRS- US APRIL SINGLE-FAMILY HOME SALES 454,000 UNIT ANN. RATE (CONS 425,000) VS MARCH 444,000 (PREV 417,000) "
Christopher Stevens  :  "MG- with early market close tmrw, closed Monday and month end next Friday do you see the market making any big moves (save for any unknown economic or european news)? I would think we try and trade flat around here."
Matthew Graham  :  "thereabouts. 2.12+ depending on what variation of the trend you use"
Gus Floropoulos  :  "MG, what's the upper echelon of the range on the 10 yr....2.10ish?"
Jason Anker  :  "CS - thats the "I'm SOO much smarted than you" look"
Christopher Stevens  :  "best image from yesterday... http://www.bloomberg.com/image/iLclDJ7sLXCo.jpg"
Matthew Graham  :  "RTRS - U.S. HOME PRICES +1.3 PCT IN MARCH FROM FEBRUARY - U.S. REGULATOR "
B-C  :  "understood, i would expect that today, im just waiting it out for some stabilization "
Christopher Stevens  :  "BC- if i see 10YR inching past 2.03 I will probably tighten my pricing a little going into a holiday weekend."
philip mancuso  :  "The good news for any desk pricing at 101-6 is they'll have nothing to hedge."
B-C  :  "true CS, i just expect complete defensive moves right now until we stabaliza somewhere"
Matthew Graham  :  "If anyone is having a rough day fielding questions from clients or otherwise needs a 1 link explanation, here's last night's article: http://www.mortgagenewsdaily.com/consumer_rates/309865.aspx . Might be helpful for some LO's that aren't as glued to the screens "
Christopher Stevens  :  "Lock desks can only 'insure' themselves so much without taking taking themselves out of the competitive market. I think you see more of this on rate sheets from investors. Hard for independent banker to add more on top of that and stay competitive."
B-C  :  "if i was the lock desk i would be pricing today at 101-06"
Matthew Graham  :  "you'd have to ask your lock desk. Strategies vary"
B-C  :  "declining market, don't lock desks usually have some insurance in case the fall continues MG?"
Christopher Stevens  :  "That data seems inconclusive to me"
Christopher Stevens  :  "Stock trader on CNBC just said banks around the world are unhedged against a rising rate environment and that is the biggest issue the floor is talking about...not a correction in the market."
Matthew Graham  :  "RTRS- US CONTINUED CLAIMS LOWEST SINCE WEEK ENDED MARCH 15, 2008 (2.897 MLN) "
Matthew Graham  :  "RTRS- US CONTINUED CLAIMS FELL TO 2.912 MLN (CONS. 3.000 MLN) MAY 11 WEEK FROM 3.024 MLN PRIOR WEEK (PREV 3.009 MLN) "
Eric Schuchaskie  :  "Arms look great - avg American keeps their mortgage 7-9 years any way "
Oliver S. Orlicki  :  "here comes the red"
Matthew Graham  :  "RTRS- US JOBLESS CLAIMS 4-WK AVG FELL TO 339,500 MAY 18 WEEK FROM 340,000 PRIOR WEEK (PREVIOUS 339,250) "
Matthew Graham  :  "RTRS - US JOBLESS CLAIMS FELL TO 340,000 MAY 18 WEEK (CONSENSUS 345,000) FROM 363,000 PRIOR WEEK (PREVIOUS 360,000) "
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