MBS and Treasuries are now back in to their best levels of the day (pricing snapshot below is taken just after 11am, but we've improved since then). Earlier in the morning, headlines surround the next iteration of the debt ceiling debate made rounds and took a quick, noticeable toll on bond markets. Once politicians stopped talking, MBS and Treasuries started improving again. All eyes, ears, hearts, and minds are intently focused on the FOMC events beginning at 2pm Eastern. Bernanke's press conference starts at 2:30pm, and major volatility is possible essentially from 2-3pm.
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 11:08 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
MBS Hit Lows; Negative Reprice Risk Already
Hearing that Boehner speech on debt ceiling is rattling bond markets a bit at the moment. Pre-FOMC antsiness doesn't help. 10's have shot up a quick 3 bps to 2.89 and Fannie 4.0s down a quick 4 ticks to 102-24. This is just on the edge of negative reprice risk.
Bond Markets Hold Close to Yesterday's Weakest Levels; Supportive Bounce For Now
Treasuries tell a better story than MBS today as the latter are just a bit outside yesterday's range. Treasuries, on the other hand, are perfectly defined by yesterday's range. Overnight low yields stopped just before hitting yesterday's lows before rising steadily to yesterday's highs.
Housing starts were merely a bump in that road, if anything. While the headline was weaker than expected, the internals showed that single-family construction was actually pretty strong. This may have added a slight bit of pressure to bond markets, but it's hard to pick out from the prevailing trend from 4am
Bank of England's lack of policy change is being credited with that weakness, but it looks like European bonds 'cared' while Treasuries did was they were going to do anyway.
For their part, MBS opened up in line with yesterday's latest levels and fell a few ticks before the Housing Starts data and another tick after that. Fannie 4.0s dipped to 102-25 from 102-28 opening highs, but are holding ground at 102-26 currently.
Economic data is done for today, and all eyes are on the afternoon's FOMC Events. The Announcement (the document that may spell out tapering plans) and the economic projections are out at 2pm while Bernanke's Press Conference BEGINS at 2:30pm, creating tape-bomb potential until at least 3pm.
ECON: Housing Starts Weaker Than Expected, Dragged Down By Multifamily
- Starts 891k vs 917k forecast
- Permits 918k vs 950k forecast
- Single family starts up 7 pct to 628k, highest since Feb
- Multifamily DOWN 11.1 pct
- Single Fam Permits +3pct, Highest since May
- Multifam DOWN 15.7
- Market Reaction: Slightly negative bias for bonds persists from overnight activity. This data didn't change that much. Moving on...
Privately-owned housing units authorized by building permits in August were at a seasonally adjusted annual rate of 918,000. This is
3.8 percent (±1.3%) below the revised July rate of 954,000, but is 11.0 percent (±1.8%) above the August 2012 estimate of 827,000.
Single-family authorizations in August were at a rate of 627,000; this is 3.0 percent (±0.9%) above the revised July figure of 609,000.
Authorizations of units in buildings with five units or more were at a rate of 268,000 in August.
Privately-owned housing starts in August were at a seasonally adjusted annual rate of 891,000. This is 0.9 percent (±13.0%)* above the
revised July estimate of 883,000 and is 19.0 percent (±11.1%) above the August 2012 rate of 749,000.
Single-family housing starts in August were at a rate of 628,000; this is 7.0 percent (±13.9%)* above the revised July figure of 587,000.
The August rate for units in buildings with five units or more was 252,000.
Privately-owned housing completions in August were at a seasonally adjusted annual rate of 769,000. This is 0.3 percent
Live Chat Featured Comments
Edgar : "10 billion treasuries, no taper MBS and same guidance as before "Data dependent". We may get a bit of bond friendly verbiage added to keep a lid on yields. They might express concerns about weak employment numbers and low inflation. "
Jeff Anderson : "I liked JR's prediction as far as amounts. I was thinking 10%, so 6.5b in tys and 2 in MBS' or around that."
Matt Hodges : "MG - the FOMC day ahead rocked. 1:44am EST - you worked late into the PST evening, i could tell"
Andy Pada : "Hilsenrath's recent article suggests that their economic forecasts are somewhat robust"
John McClellan : "i am very optimistic!"
John McClellan : "Fed announces that even though they want to taper QE they understand the need to keep the housing market robust so they decide to only taper TSY buys and NOT MBS – this comes as a complete shock to traders (some at least) and MBS rally and our rates drop 75- 100 bps."
John Rodgers : "JR's forecast - 7b treasuries 3b MBS.....MBS rally"
Erik Grimmer : "So what do people think the response will be to the fomc announcement? I think they taper 5 billion of treasuries......market rallys off of it some, but bonds improve slightly due to forward guidance. Your thoughts?"
John Tassios : "This increase in SFR could be a function of rents rising too rapidly and better value to purchase. But, higher rates will hurt that argument going forward"
Matthew Graham : "dragged down by multifam"
Matthew Graham : "RTRS- US AUG SINGLE FAMILY PERMITS +3.0 PCT TO 627,000 UNIT RATE, HIGHEST SINCE MAY 2008; MULTIFAMILY -15.7 PCT TO 291,000 UNIT RATE "
Matthew Graham : "RTRS- US AUG SINGLE-FAMILY STARTS +7.0 PCT TO 628,000 UNIT RATE, HIGHEST SINCE FEBRUARY; MULTIFAMILY -11.1 PCT TO 263,000 UNIT RATE "
Matthew Graham : "RTRS- US AUG HOUSING PERMITS 918,000 UNIT RATE (CONSENSUS 950,000) VS JULY 954,000 RATE "
Matthew Graham : "RTRS- US AUG HOUSING PERMITS -3.8 PCT VS JULY +3.9 PCT "
Matthew Graham : "RTRS- US AUG HOUSING STARTS 891,000 UNIT RATE (CONSENSUS 917,000) VS JULY 883,000 (PREV 896,000) "
Matthew Graham : "RTRS- US AUG HOUSING STARTS +0.9 PCT VS JULY +5.7 PCT (PREV 5.9 PCT) "
Victor Burek : "another miss for housing"
Scott Valins : "Those MBA mortgage apps numbers were way down last week and way up this week due to the Labor Day holiday. Unchanged from 2 weeks ago."
John McClellan : "Good morning all! Looks like it's going to be a bumpy ride!!!"