MBS are in slightly positive territory for now, but advancing to anything more triumphant has proven quite challenging so far. Fannie 4.0s saw their first round of resistance at 102-06 and most recently bumped their heads on the ceiling at 102-08--ominously in line with yesterday's lows. Treasuries are already back into negative territory after turning positive earlier this morning. That modest rally followed a weak overnight session that took yields as high as 2.936. Higher-than-expected Jobless Claims helped 10's down to2.875, but they met firm resistance with 2 big bounces there. It doesn't look reassuring for now.
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ECON: Freddie Mac Primary Mortgage Market Survey (from 4.40 to 4.58)
McLEAN, VA -- Freddie Mac (OTC: FMCC) today released the results of its Primary Mortgage Market Survey, showing average fixed mortgage rates following bond yields higher, and reaching new highs for the year, with the expectant release of the Fed’s comments around taper timing of its bond purchase program.
30-year fixed-rate mortgage (FRM) averaged 4.58 percent with an average 0.8 point for the week ending August 22, 2013, up from last week when it averaged 4.40 percent. A year ago at this time, the 30-year FRM averaged 3.66 percent.
15-year FRM this week averaged 3.60 percent with an average 0.7 point, up from last week when it averaged 3.44 percent. A year ago at this time, the 15-year FRM averaged 2.89 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.21 percent this week with an average 0.5 point, down from last week when it averaged 3.23 percent. A year ago, the 5-year ARM averaged 2.80 percent.
1-year Treasury-indexed ARM averaged 2.67 percent this week with an average 0.5 point, unchanged from last week. At this time last year, the 1-year ARM averaged 2.66 percent.
“Fixed mortgage rates continued to follow bond yields higher leading up to the August 21st release of the Federal Reserve monetary policy committee’s minutes for July. In its July 30th and 31st meetings, the committee members were broadly comfortable with a plan to start reducing its bond purchases later this year, although a few emphasized the importance of being patient." - Frank Nothaft, Vice President and Chief Economist, Freddie Mac
Bond Markets Challenging Resistance after AM Gains
Treasuries rose to their highest levels since July 2011 overnight as Asian and European markets extended yesterday's post-FOMC sell-off. That's not an uncommon occurrence when the US trading session gets news late in the day (after Asia and Europe are done for the day), and not necessarily indicative of an ongoing trend.
That's being born out today with 10yr yields returning to the high 2.8's after slightly higher Jobless Claims. They had been as high as 2.936 overnight and stood at 2.91 before the claims data. They're currently challenging the lows of the day at 2.886 (failing so far).
For their part, MBS have tread a similar path since 8am, coming into the domestic session at their weakest levels in over 2 years but improving after Claims. Fannie 4.0s started at 101-28 and are up to 102-04 currently. This mirrors Treasuries in that MBS are just a step away from 102-05 highs and have bounced around this narrow range several times without breaking any lower (yet).
There is no other significant scheduled data for the day, but snippets of Fed-speak may trickle in from Jackson hole--though it's hard to imagine what new information would come to light considering their message hasn't much changed for 3 months today.
ECON: Markit Manufacturing PMI Close to Previous Reading
- Manufacturing PMI 53.9 vs 53.7 previously
- Output 53.4 vs 54.8
- Orders 56.5 vs 55.5
- PMI highest since March
- Orders highest since January
The Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ (PMI™)1signalled the strongest improvement in manufacturing business conditions in five months during August. The flash PMI index, which is based on approximately 85% of usual monthly replies, was up slightly from July’s 53.7 to 53.9, and suggested a moderate expansion of the manufacturing sector.
Firms received a larger volume of new orders in August, with a number of companies linking this to greater demand and new client wins. Moreover, the rate of growth was strong and, having accelerated for the fourth month running, the fastest since January.
Both domestic and export orders increased over the month. Although new export work rose modestly, partly reflecting increased global activity, the rate of growth eased from July’s seven-month peak.
ECON: House Prices Rose 2.1 percent in the Second Quarter
Upward momentum in U.S. house prices remained strong in the second
quarter, as prices rose 2.1 percent from the previous quarter, according to the Federal
Housing Finance Agency (FHFA) House Price Index (HPI). This is the eighth consecutive
quarterly price increase in the purchase-only, seasonally adjusted index.
“The housing market experienced one of its strongest quarters since the boom in the middle of
the last decade,” said FHFA Principal Economist Andrew Leventis.
The HPI is calculated using home sales price information from mortgages sold to or guaranteed
by Fannie Mae and Freddie Mac. Compared with last year, house prices rose 7.2 percent from
the second quarter of 2012 to the second quarter of 2013. FHFA’s seasonally adjusted
monthly index for June was up 0.7 percent from May.
ECON: Jobless Claims Slightly Higher Than Expected
- Claims 336k vs 330k forecast
- 4-week avg 330,500 vs 332,750 previously
- Continued Claims 2.97m vs 2.969m forecast
- Market Reaction: Mildly positive for bond markets.
In the week ending August 17, the advance figure for seasonally adjusted initial claims was 336,000, an increase of 13,000 from the previous week's revised figure of 323,000. The 4-week moving average was 330,500, a decrease of 2,250 from the previous week's revised average of 332,750.
The advance seasonally adjusted insured unemployment rate was 2.3 percent for the week ending August 10, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending August 10 was 2,999,000, an increase of 29,000 from the preceding week's revised level of 2,970,000. The 4-week moving average was 2,985,750, a decrease of 1,000 from the preceding week's revised average of 2,986,750.
Live Chat Featured Comments
Matt Hodges : "june's closings were at lower rates... that trend will not continue as prices must retreat in an increasing interest rate market, or so supply/demand tells us"
Matthew Graham : "RTRS- U.S. HOME PRICES +0.7 PCT IN JUNE FROM MAY - U.S. REGULATOR "
James Barnes : "William Hanson - FNMA direct allow that even at 97%, 100% gift for everything. Just closed one last month"
Matthew Graham : "RTRS - MARKIT U.S. MANUFACTURING SECTOR FLASH PMI FOR AUGUST AT 53.9 VS FINAL 53.7 IN JULY "
William Hansen : "Has anyone else heard of doing a 95 ltv with all DP money being a gift for a fannioe/Freddie product? "
William Hansen : "The problem with the minutes is that no matter what side of the fence you are on it has support for your opinion. "
Matthew Graham : "pretty uneventful Jon. Slightly wider in August so far, but nowhere near late June and early July"
Jon : "MG, how are those spreads looking?"
Matthew Graham : "EG, it was 6k higher than consensus--essentially on the screws. If it was 350-360k, we'd be moving more"
Matthew Graham : "To me, it means that if NFP is 163.7263k or higher, we taper"
Erik Grimmer : "I don't understand how we get a report that is bind friendly (or at least supposed to be) yet we still lose ground."
Matthew Graham : "they don't. they say 'depends on data.' I think they're very clear in that. From there, it just depends on how well or how strongly convicted the listener/reader is about what that means."
Victor Burek : "the prior meeting they said as long as economic conditions continue to improve, yet this meeting they said economic conditions got a little worse"
Victor Burek : "got a question...every headline or talking head is saying minutes indicate fed on pace to taper in sept...where in those minutes does it lead anyone to think they are definitely tapering in sept?"
William Hansen : "A true guidance would be great. The fed explains the tapering the same way my 10yr old explains why he didn't do his homework. "
Matthew Graham : "RTRS- US CONTINUED CLAIMS ROSE TO 2.999 MLN (CONS. 2.960 MLN) AUG 10 WEEK FROM 2.970 MLN PRIOR WEEK (PREV 2.969 MLN) "
Matthew Graham : "RTRS- US JOBLESS CLAIMS 4-WK AVG FELL TO 330,500 AUG 17 WEEK, LOWEST SINCE NOV 2007, FROM 332,750 PRIOR WEEK (PREVIOUS 332,000) "
Amitab Mukerjee : "These are exciting times, watching the chart yesterday was like watching the Kentucky Derby. But your comment gives me some perspective. I think I am a little to excited about something that ultimately has no effect on me since Friday."
Amitab Mukerjee : "From MG: (8/21/13 8:02PM): no comment on whether or not things will get worse in 2 weeks, just saying the shock value of the gallup headline isn't as shocking as it seems."
Amitab Mukerjee : "From MG: (8/21/13 7:58PM): non-seasonally adjusted employment is cyclical, with U/E peaking in January and July usually. So because it's a 30-day rolling average, it would not be surprising if BLS's unadjusted employment figures were similar, but the analysis of Gallup as a meaningful jump in U/E is overstated to say the least."
Amitab Mukerjee : "AP: MG addressed the weakness of the Gallup poll yesterday."
Andy Pada : "household income article"
Andy Pada : "http://www.cnbc.com/id/100980411"
Andy Pada : "market does not seem to be interested in that gallup poll"
Jon : "http://www.breitbart.com/Big-Government/2013/08/21/Gallup-Unemployment-jumped-from-77-to-89"