As the morning update below notes, bond markets couldn't help but get involved with the global flight-to-safety surrounding the turmoil in Syria. That said, Treasuries and MBS continue to experience less movement than stocks. 10yr yields in particular, have been struggling to break below their important 2.75% inflection point which had acted as a ceiling on the way up. If this continues to be the case despite more aggressive cues from related markets (German Bunds, for instance, have run farther into positive territory relative to previous levels of correlation despite the fact that Germany saw positive economic data overnight and the US saw weaker economic data this morning), it's a major reinforcement of the technical and structural significant of 2.75 (structural = having to do with how traders' positions relate to specific levels).
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 11:06 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: Consumer Confidence Slightly Higher Than Expected
- Main index 81.5 vs 79.0 forecast
- Last month revised to 81.0 from 80.3 previously
- Present Situation Index 70.7 vs 73.6 previously
- Expectation Index 88.7 vs 86.0 previously
- Jobs "hard to get" 33.0 vs 35.2 previously, lowest since Sept 2008
Market reaction: Treasuries weaken just over 1bp in 10yr yields. MBS shed a few ticks but neither are following through with further selling as yet.
The Conference Board Consumer Confidence Index®, which had declined in July, increased slightly in August. The Index now stands at 81.5 (1985=100), up from 81.0 in July. The Present Situation Index decreased to 70.7 from 73.6. The Expectations Index increased to 88.7 from 86.0 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 August 15.
Says Lynn Franco, Director of Economic Indicators: “Consumer Confidence increased slightly in August, a result of improving short-term expectations. Consumers were moderately more upbeat about business, job and earning prospects. In fact, income expectations, which had declined sharply earlier this year with the payroll tax hike, have rebounded to their highest level in two and a half years. Consumers’ assessment of current business and labor market conditions, on the other hand, was somewhat less favorable than last month.”
Consumers’ assessment of current conditions moderately declined. Those stating business conditions are “good” decreased to 18.4 percent from 20.8 percent, while those stating business conditions are “bad” was virtually unchanged at 24.8 percent. Consumers’ appraisal of the labor market was mixed. Those claiming jobs are “plentiful” decreased to 11.4 percent from 12.3 percent, while those claiming jobs are “hard to get” declined to 33.0 percent from 35.2 percent.
ECON: Case-Shiller Home Prices Almost As-Expected
- 20 city up 0.9 vs +1.0 forecast
- +2.2 unadjusted vs +2.3 forecast
- +12.1 pct annually vs 12.1 forecast
- Market Reaction: none
Data through June 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 that prices continue to increase. The National Index grew 7.1% in the second quarter and 10.1% over the last four quarters. The 10-City and 20-City Composites posted returns of 2.2% for June and 11.9% and 12.1% over 12 months.
All 20 cities posted gains on a monthly and annual basis. However, in only six cities were prices rising faster this month than last, compared to ten in May. Dallas and Denver reached new all-time highs as they did last month, with returns of +1.7% each in June. San Francisco’s rebound is the largest, up 47.0% from its low in March 2009. Phoenix is second, 37.1% above its September 2011 low.
Bond Markets Reluctantly Follow Geopolitical Risk
If yesterday afternoon's Kerry speech wasn't enough for bond market to get wholeheartedly involved with the flight to safety move (stock prices down, bond prices up) suggested by equities, today is shaping up differently. The wires are rife with Syria-related headlines--most of them sounding reasonably austere. Here are some highlights:
- GENEVA - VISIT BY U.N. CHEMICAL WEAPONS INSPECTORS IN SYRIA POSTPONED UNTIL WEDNESDAY TO "IMPROVE PREPAREDNESS AND SAFETY" - U.N. STATEMENT - RTRS
- BRITAIN IS CONSIDERING 'PROPORTIONATE RESPONSE' TO SUSPECTED CHEMICAL WEAPONS ATTACK IN SYRIA - PM'S SPOKESMAN - RTRS
- Tuesday, August 27, 2013 1:47:40 AM TURKISH FOREIGN MINISTER SAYS "CRIME AGAINST HUMANITY" CANNOT GO UNANSWERED IN SYRIA, TEST FOR INTERNATIONAL COMMUNITY - RTRS
- MOUALEM SAYS SYRIA WILL PRESS ON WITH MILITARY CAMPAIGN DESPITE ANY POSSIBLE FOREIGN STRIKES - RTRS
- Tuesday, August 27, 2013 4:42:12 AM BRITISH PRIME MINISTER CAMERON RECALLS PARLIAMENT FROM SUMMER BREAK TO DISCUSS SYRIA ON THURSDAY - RTRS
- U.S. MILITARY "READY TO GO" IF OBAMA ORDERS ACTION OVER CHEMICAL WEAPONS ATTACK IN SYRIA, U.S. DEFENSE SECRETARY TELLS BBC - RTRS
- SYRIA OPPOSITION HAS HANDED WESTERN POWERS LIST OF SUGGESTED TARGETS FOR STRIKE - SOURCES - RTRS
- "The US government asked Greece to provide its military bases in Kalamata and Souda, in case Washington decides to directly intervene in Syria." - Ekathmerini.com
Global markets have been pushing the flight-to-safety bid all night with the onset of European hours seeing the biggest drop for stocks and bonds. Treasuries may be reluctant participants now, but 'reluctant' is the key word. Case in point, S&Ps are down nearly 20 points while 10yr yields are less than 4bps lower so far this morning.
Still, we are indeed seeing bond markets 'play the game,' as it were. Buyers were lined up at the 8:20am CME open and provided another jolt lower for 10yr yields, which are now challenging an important horizontal pivot at 2.75%.
MBS opened a few ticks higher and have improved from there with 4.0s up 7 ticks to 103-12 so far. Moments ago, Case Shiller Home Prices came out slightly weaker than expected, but had no material impact on trading levels. The morning's major data is Consumer Confidence at 10am and the reaction to that--the extent to which bond markets favor the important data over the global headlines---will be informative for the rest of the day and week. As of this moment, the 2.75 zone (the inability to break it) is the most informative development so far.
Live Chat Featured Comments
Matt Hodges : "can be excluded per, CFPB (8/14/13 guide): Federal or state government-sponsored MIPs: For example, exclude up-front
and annual FHA premiums, VA funding fees, and USDA guarantee fees."
Michael Gillani : "They specifically said only box 1 of the GFE is included and nothing else."
Michael Gillani : "Either way, that shouldn't put much of a crimp in anyone's style. What it will do is substantially curb loans with loan amounts of $100k or less. Once again, the consumer loses."
Michael Gillani : "I just spoke with Caliber funding yesterday and per their corporate directive, the 3% will include only box 1 of the GFE. So lender paid comp + lender admin fee. So with a $795 lender admin fee on a $150k loan, you can still make 2.47%, which would probably mean 2.25 or 2.375 since comp levels go by eighth or quarter."
Matthew Graham : "RTRS- US CONSUMER PRESENT SITUATION INDEX IN AUG 70.7 VS JULY 73.6 -CONFERENCE BOARD "
Matthew Graham : "RTRS- CONFERENCE BOARD'S CONSUMER CONFIDENCE INDEX FOR JULY REVISED TO 81.0 (PREVIOUS 80.3) "
Matthew Graham : "RTRS- US AUGUST CONSUMER CONFIDENCE INDEX 81.5 (CONSENSUS 79.0) - CONFERENCE BOARD "
Jason York : "just means that it hasn't been restored or is currently being used on another open VA loan"
Roger Moore : "should this statement on a COE (va loan) worry me? THIS VETERAN'S BASIC ENTITLEMENT IS $0*
TOTAL ENTITLEMENT CHARGED TO PREVIOUS VA LOANS IS $40,825*"
Andy Pada : "Prof. Shiller just opined that the housing market is speculative and based on irrational exuberance."
Matt Hodges : "the bigger issue with HP shifting from 3% to 5% is that 3% can be gift, 5% MUST be borrower's own cash"
Jason Anker : "i think it says "standard case numbers" so we need to figure out what that means. Is HP a "standard case" numbers?"
Matt Hodges : "about to do a lunch n learn on HP and i'd like to be accurate, you know?"
Andrew Benson : "good question: I was wondering the same myself. The only exception lists is refi plus."
Matt Hodges : "here is the release: https://www.fanniemae.com/content/release_notes/du-do-release-notes-11162013.pdf"
Matt Hodges : "when Fannie releases 9.1 in November, the max LTV drops to 95%. I assume that includes HomePath, but the release is silent on that. Can anyone confirm or deny?"
Matthew Graham : "RTRS- US JUNE 20-METRO AREA HOME PRICES +12.1 PCT (CONSENSUS +12.1 PCT) FROM YEAR AGO -- CASE-SHILLER "
Matthew Graham : "RTRS - US JUNE 20-METRO AREA HOME PRICES NON-ADJUSTED +2.2 PCT (CONSENSUS +2.3) VS REVISED +2.5 PCT IN MAY-S&P/CASE-SHILLER "
Matthew Graham : "RTRS- US JUNE HOME PRICES IN 20 METRO AREAS +0.9 PCT SEASONALLY ADJ (CONSENSUS +1.0) VS +1.0 PCT IN MAY- S&P/CASE-SHILLER "
Edgar : "Gm all....nice call by VB and BB last week that low 2.9 was the top."
Erik Grimmer : "Housing data was at or below expectations just now"
Christopher Stevens : "Like this break towards 2.75 and would love to see some consolidation at this level to a move lower"