The week got off to an expectedly slow start in terms of volume and volatility, with prices holding near Friday's latest levels for the first few hours. The morning's economic data had no detectabel effect, but a Speech and Q&A session with NY Fed's William Dudley gave bond markets a boost mid-morning. Dudley said that the economic headwinds seen as a result of rising rates indicates the effectiveness of QE (given that rates are rising due to changes in QE expectations). In general, both his speech and Q&A were cautionary against premature tapering and reinforced the necessity of QE to maintain whatever sort of economic momentum can be maintained. Fannie 4.0s are up roughly a quarter of a point and 10yr yields are about .025% lower.
MBS Pricing Snapshot
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Pricing as of 11:08 AM EST
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MBS Just Barely Into Positive Territory; Quiet Morning: Dudley Helps
With Japan out on Holiday and the Typhoon in China causing a brief shut-down of the Hang Seng, overnight markets got off to a slow start. Treasuries opened in Europe, right in line with Friday's latest levels before moving higher in yield in tandem with German Bunds. The range before 8am was roughly 2.73 to 2.76.
That led to 8am levels also in line with Friday's latest, for MBS. From there, we've spent a few moments in slightly weaker territory, but more time in positive territory.
Bond markets haven't been too terribly interested in any of the economic data, which included an improvement in the Chicago Fed National Activity Index and a decline in Markit's Purchasing Managers Index.
Most recently, dovish comments from NY Fed President William Dudley have been an ally for Fixed Income, helping MBS reenter positive territory and giving Treasuries a slight boost to their best levels of the morning.
ECON: Manufacturing Activity Slightly Lower Than Expected -Markit
- Markit PMI index 52.8 vs 54.0 forecast
- Employment index at 51.4 vs 53.1 in August
- Market Reaction: Markit's Purchasing Managers Index (PMI) plays second fiddle to ISM data in the US, meaning that it's less prone to cause detectable market movement. It's hard to say if it's causing any this morning, but if so, it would be slightly positive for MBS and Treasuries.
At 52.8 in September, the Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ (PMI™)1 suggested a modest improvement in manufacturing business conditions. The flash PMI index, which is based on approximately 85% of usual monthly survey replies, was down from 53.1 in August, and indicated that the rate of growth was the weakest since June.
Manufacturing output increased at a solid rate in September. Moreover, the rate of growth was the fastest since March, having accelerated from a ten-month low in August. Firms that raised production often attributed this to higher new orders.
Live Chat Featured Comments
Matthew Graham : "RTRS- FED'S DUDLEY: CANNOT CUT PACE OF QE UNTIL CONFIDENT LABOR MARKET IMPROVEMENT WILL CONTINUE "
Matthew Graham : "RTRS- U.S. FED'S DUDLEY SAYS VERY ACCOMMODATIVE POLICY NEEDED TO FORCEFULLY PUSH AGAINST ECONOMIC HEADWINDS "
Ira Selwin : "Understandable. They aren't happy about it themselves. They lost a lot of business due to the custodian/software switch."
Daniel Kramer : "Not sending them any more loans for a long time again. They bragged about service and being able to close land fast. Don't care if this was an issue with then using a new software or bank to find the loans you can't so this to purchases and loans already cleared. "
Ira Selwin : "Yep, they don't want to run into the issues with those files. Until they catch up."
Daniel Kramer : "And a refi they won't schedule the closing for that has been CTC for over a week. "
Daniel Kramer : "Ok. Have a purchase that closed last Friday and still not funded yet. "
Ira Selwin : "They are prioritizing retail/wholesale"
Ira Selwin : "They are funding loans, there is just a backlog that's all."
Daniel Kramer : "Any news on Nationstar resuming funding loans yet?"