It's been an interesting session so far. MBS came in the door in line with yesterday's latest levels, digested an oddly flavored Jobless Claims report and proceeded to add another tick of positivity, stably held into the 9am hour. From then on, bond markets simply looked to be packing up and going home. There was no drama and no major headline motivator--just a slow, steady selling trend into 10am.
The 10am data was similarly tough to digest for bond markets and caused another shudder to work it's way through trading levels. That knocked MBS down a few pegs, but they climbed back to pre-data levels quickly only to get knocked down by the same number of pegs again. Since then, they've been range bound between those post-data highs and lows seen within minutes of the data itself.
MBS Pricing Snapshot
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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
ECON: Philly Fed Index Much Stronger Than Expected
- Headline index 22.3 vs 10.0 forecast
- Conditions 58.2 vs 38.9 previously
- New Orders 21.2 vs 5.3 previously
- Employment Index 10.3 vs 3.5
- Market Reaction: Bond markets weaker at first, but holding in a relatively supportive fashion so far.
Manufacturing activity picked up in September, according to firms responding to this month’s Business Outlook Survey. The survey’s broadest indicators for general activity, new orders, shipments, and employment were all positive and higher than in August. The survey's indicators of future activity were significantly higher, suggesting improved optimism about growth over the next six months.
Indicators Suggest Expansion
The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from 9.3 in August to 22.3 this month (see Chart). The index has now been positive for four consecutive months and is at its highest reading since March 2011. The percentage of firms reporting increased activity this month (36 percent) was greater than the percentage reporting decreased activity (14 percent).
The demand for manufactured goods, as measured by the current new orders index, increased 16 points, to 21.2. Shipments rebounded from last month: The current shipments index increased 22 points. The diffusion indexes also suggest that, on balance, inventories and deliveries were near steady this month, while unfilled orders increased slightly.
Labor market indicators showed improvement this month. The current employment index increased 7 points, to 10.3, its highest reading since April of last year. The percentage of firms reporting increases in employment (21 percent) exceeded the percentage reporting decreases (10 percent). Firms also reported a longer average workweek compared with last month, and the index increased 15 points, to 12.2.
ECON: Existing Sales Highest in 6.5 Years- NAR
- 5.48 mln unit annual rate vs 5.25 forecast
- Highest since 2/2007
- Median prices $212,100 + 14.7 pct from last year
- Median price rise is strongest since Oct 2005
- Distressed sales account for lowest percentage of total since records began in 2008.
Existing-home sales increased in August and reached the highest level in six-and-a-half years, while the median price shows nine consecutive months of double-digit year-over-year increases, according to the National Association of Realtors®.
Total existing-home sales1, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 1.7 percent to a seasonally adjusted annual rate of 5.48 million in August from 5.39 million in July, and are 13.2 percent higher than the 4.84 million-unit level in August 2012.
Sales are at the highest pace since February 2007, when they hit 5.79 million, and have remained above year-ago levels for the past 26 months.
Lawrence Yun, NAR chief economist, said the market may be experiencing a temporary peak. “Rising mortgage interest rates pushed more buyers to close deals, but monthly sales are likely to be uneven in the months ahead from several market frictions,” he said. “Tight inventory is limiting choices in many areas, higher mortgage interest rates mean affordability isn’t as favorable as it was, and restrictive mortgage lending standards are keeping some otherwise qualified buyers from completing a purchase.”
First Move is Weaker Following 10am Data
Fannie 4.0s are down a quick 2 ticks, now 5 on the day to 103-31+ and 10's are up to 2.73 after stronger than expected data from both Philly Fed and Existing Sales. Looks like there's already some indecision about continuing with the selling trend so it's too soon to tell if it will follow through.
Under Slight Pressure Ahead of Remaining Econ Data
Bond markets were relatively contained overnight, though volume was high as global markets reacted to yesterday's FOMC news. 10yr yields dipped into the 2.67's during Asian hours and moved back up to 2.70's during the hand-off to Europe at 2am.
Yields were as high as 2.712 but began falling heading into the domestic session, ultimately meeting resistance just over 2.69. Morning volatility--unrelated to Jobless Claims, which were basically disregarded--has seen several bounces between those two most recent overnight range boundaries, but we are under relatively more pressure now as stocks open and as econ data approaches.
MBS are holding up a bit better than Treasuries with Fannie 4.0s down only 2 ticks to 104-02 and Fannie 3.5s down 5 ticks to 100-25. The next move may be informed by one or both of the reports out at 10am.
ECON: Jobless Claims Distorted by Computer Problems Again
- Claims 309k vs 330k forecast
- Last week revised to 294k from 292k
- None of that may matter because the Labor Department says that two states were still processing a backlog of claims due to the same issue that affected last week's claims--hence the low print today and no major revision to last week. As such, bond markets have essentially tossed out the result and await the 10am data.
In the week ending September 7, the advance figure for seasonally adjusted initial claims was 292,000, a decrease of 31,000 from the previous week's unrevised figure of 323,000. The 4-week moving average was 321,250, a decrease of 7,500 from the previous week's revised average of 328,750.
The advance seasonally adjusted insured unemployment rate was 2.2 percent for the week ending August 31, a decrease of 0.1 percentage point from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending August 31 was 2,871,000, a decrease of 73,000 from the preceding week's revised level of 2,944,000. The 4-week moving average was 2,953,000, a decrease of 24,750 from the preceding week's revised average of 2,977,750.
Live Chat Featured Comments
Scott Valins : "home sales June numbers. Realtors said it's the last hurrah"
Matthew Graham : "RTRS- PHILADELPHIA FED EMPLOYMENT INDEX SEPTEMBER 10.3 VS AUG 3.5 "
Matthew Graham : "RTRS- PHILADELPHIA FED NEW ORDERS INDEX SEPTEMBER 21.2 VS AUG 5.3 "
Matthew Graham : "RTRS - PHILADELPHIA FED SIX-MONTH BUSINESS CONDITIONS SEPTEMBER 58.2 VS AUG 38.9 "
Matthew Graham : "RTRS- PHILADELPHIA FED BUSINESS CONDITIONS SEPTEMBER 22.3 (CONSENSUS 10.0) VS AUG 9.3 "
Matthew Graham : "RTRS- US AUG EXISTING HOME SALES +1.7 PCT VS JULY +6.5 PCT (PREV +6.5 PCT)-NAR "
Oliver Orlicki : "Wow! Big beat on Philly fed"
Matthew Graham : "RTRS- US AUG EXISTING HOME SALES RATE HIGHEST SINCE FEB 2007 "
Matthew Graham : "RTRS - US AUG EXISTING HOME SALES 5.48 MLN UNIT ANNUAL RATE (CONS 5.25 MLN), VS JULY 5.39 MLN (PREV 5.39 MLN)-NAR "
Matt Hodges : "OR with Summers out, and Yellen likely in, she wielded control behind the scenes?"
Hugh W. Page : "IMO the Fed's goal of improving communication and transparency has created more volatility. The Fed talks, pundits react and opine, expectations aren't met then the Fed tweaks and changes creating more expectations, reactions, etc. Clearly the Fed has the best data and the smartest people but It gives me the impression they don't have a good handle on this."
Brent Borcherding : "John--Do you think, forget that talking heads were forecasting taper, that September was the time to start the taper based on data, i.e. jobless claims, inflation #s etc?"
Matt Hodges : "somehow i have to believe they know more than i do, which of course they do. It's still perplexing"
John Tassios : "I think it added volatility, don't get me wrong, I love the short term affect of lower yields for my customers, but I feel it will cost longer term stability in bond markets. I feel if they did 5 bill, then say they will stand pat and look at data, it would have produced a more meaningful longer terrn 3 to 6 month bond rally with longer term bond buyers coming back in to buy bonds. Now we have good short term knee jerk lower yields, but I am afraid we will have 20 point selloffs again once tape"
Brent Borcherding : "I think the fact they proved they are not on a preset course increased their credibility."
Scott Valins : "wonder if rate sheets will be improved if we stay flat. "
John Tassios : "My answer to question is that short term, we rally with lower bond yields with FED being biggest buyer. But at some point we will have huge selloffs again when taper talk comes back again, and now even more uncertainty in bond market. Bond traders got burned the past 4 months with FED speak saying that it is time to dial bck this fall, possibly starting in sept. I agree with JR's comment yesterday that it would have been better to do a small taper of 5 bil, all in TSY's and then say we will sta"
Ray Leone : "I liked the good old days when 'real' economic numbers moved the markets; where moves in the bond market were the inverse of those in equities. Ah, the good old days."
Jeff Anderson : "CNBC said the states are Ca and NV."
Matthew Graham : "RTRS - LABOR DEPT ANALYST SAYS IT APPEARS THAT TWO STATES WERE STILL PROCESSING A BACKLOG OF CLAIMS AFTER COMPUTER UPGRADES WHICH DAMPENED THE PRIOR WEEK'S CLAIMS "
Matthew Graham : "RTRS- US CONTINUED CLAIMS FELL TO 2.787 MLN (CONS. 2.900 MLN) SEPT 7 WEEK, LOWEST SINCE JAN 2008, FROM 2.815 MLN PRIOR WEEK (PREV 2.871 MLN) "
Matthew Graham : "RTRS- US JOBLESS CLAIMS ROSE TO 309,000 SEPT 14 WEEK (CONSENSUS 330,000) FROM 294,000 PRIOR WEEK (PREVIOUS 292,000) "