Fannie 4.0s are trading in territory not seen since we passed it on the way down back on June 19th. Today's gains have been slow and steady, once again extending the rally that grew out of the last week's post-FOMC consolidation. Despite the positivity, and the fact that it seemed likely at the end of last week, it's been more incidental than "utterly determined." In other words, MBS have improved, but it could have gone either way.
Today's boost began in the overnight session with weaker data out of Germany and a speech from European Central Bank member Couere that promised ongoing accommodation. These weren't major events, but just enough to tilt the balance in favor of higher bond prices. Light volume offered less resistance to improvement up until 10yr yields hit 2.672, their lowest yield last week. Once broken, yields flushed quickly lower to 2.652, paving the way for MBS to push even farther into new highs.
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 Continue Outperforming Treasuries but Face Their own Resistance
What is being seen at 2.672% in terms of 10yr yields is similarly being seen in Fannie 4.0s at 104-15. We've had 10-20 bounces around there since 10:15am and continue to have a hard time making it through, despite being at the highs of the day. 10yr yields are at their lows, but still blocked by technical resistance at 2.672.
If these levels break, it could be viewed as a technical "buy" signal, resulting in further incremental price improvements. Until/unless that happens, current activity is reinforcing the resistance. One or two lenders may be considering positive reprices, but breaking the technical barriers at 104-15 and 2.672 would pave the way for a higher probability reprice situation.
ECON: Consumer Confidence Slightly Weaker Than Expected
- Confidence 79.7 vs 79.9 Forecast
- Last month revised to 81.8 from 81.5
- Present Situation 73.2 vs 70.9 previously
- Expectations 84.1 vs 89.0 previously
- 'Jobs Hard to Get' 32.7 vs 33.3 previously
- Market Reaction: Treasuries continue to struggle with a break below 2.68, but move back within striking distance after the weaker data. MBS continue to outperform and are 1 tick higher than previous highs.
The Conference Board Consumer Confidence Index®, which had increased slightly in August, decreased in September. The Index now stands at 79.7 (1985=100), down from 81.8 in August. The Present Situation Index grew to 73.2 from 70.9. The Expectations Index fell to 84.1 from 89.0 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 September 13.
Says Lynn Franco, Director of Economic Indicators: “Consumer Confidence decreased in September as concerns about the short-term outlook for both jobs and earnings resurfaced, while expectations for future business conditions were little changed. Consumers’ assessment of current business and labor market conditions, however, was more positive. While overall economic conditions appear to have moderately improved, consumers are uncertain that the momentum can be sustained in the months ahead.”
ECON: FHFA Home Prices Rise 1 Percent in July
U.S. house price appreciation continued in July 2013, rising
1.0 percent on a seasonally adjusted basis from the previous month, according to the Federal
Housing Finance Agency (FHFA) monthly House Price Index (HPI). The July HPI change
marks the eighteenth consecutive monthly price increase in the purchase-only, seasonally
adjusted index. The previously reported 0.7 percent increase in June remained unchanged.
The HPI is calculated using home sales price information from mortgages either sold to or
guaranteed by Fannie Mae and Freddie Mac. Compared to July 2012, house prices were up
8.8 percent in July. The U.S. index is 9.6 percent below its April 2007 peak and is roughly
the same as the March 2005 index level.
ECON: Case-Shiller Home Prices Rise Slightly Less Than Expected
- 20 city index +0.6 vs +0.8 forecast
- 20 city Year/Year +12.4 vs +12.4 forecast
- Year/Year increase is highest since Feb 2006
Data through July 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 increases of 1.9% and 1.8% from June for the 10- and 20-City Composites. For at least four months in a row, all 20 cities showed monthly gains. Phoenix posted 22 consecutive months of positive returns. Although home prices in all the cities increased, 15 cities and both Composites saw these monthly rates decelerate in July versus June.
Over the last 12 months, prices rose 12.3% and 12.4% as measured by the 10- and 20-City Composites. The year-over-year returns show a brighter outlook with 13 cities posting improvement in July versus June values. Las Vegas increased the most from +24.9% in June to an impressive +27.5% in July.
Bond Markets Stronger Overnight; Actively Testing Last Week's Highs
At a glance:
- Flat to start overnight session
- Slightly stronger in Europe, German data/ECB help
- Still in positive territory this morning, but blocked by long term resistance so far in Treasuries.
Both Treasuries and MBS are close to their highest prices from last week, seen in the wake of the FOMC Announcement. Treasuries aren't quite there yet (2.68 this morning vs 2.673 briefly last Wednesday), but MBS are slightly better (Fannie 4.0s at 104-12 this morning vs 104-08 on Thursday).
We've managed to return to these outer boundaries quite gradually over the past 3 sessions and this morning's overnight session was no exception. Treasuries were flat and inactive during Asian hours, perking up a bit into the European session with some help from weaker Economic data in Germany and most recently after supportive comments from ECB board member Coeure.
The latest push toward positive levels came right at the open of the CME, when Treasury Futures floor trading starts and liquidity begins ramping up for the day. It's notable then, that resistance has remained in place for Treasuries despite that increased volume. A sincere break into better territory may require a sincere miss in the 10am Consumer Confidence data.
Live Chat Featured Comments
Matthew Graham : "Yeah, big miss or beat on Consumer Confidence trumps whatever the 2yr auction could bring in terms of movement potential."
Gus Floropoulos : "no weight on cc?"
William Packer : "consumer confidence... "
John Tassios : "then should be flat day with that and the 2 yr auction coming up"
Matthew Graham : "yes"
John Tassios : "MG, resistance level here is around 2.68 or so for 10 Yr?"
Matthew Graham : "RTRS - U.S. HOME PRICES +8.8 PCT IN 12 MONTHS THROUGH JULY - U.S. REGULATOR "
Matthew Graham : "RTRS- US JULY 20-METRO AREA HOME PRICES NON-ADJUSTED +1.8 PCT (CONSENSUS +2.0) VS +2.2 PCT IN JUNE -S&P/CASE-SHILLER "
Matthew Graham : "RTRS- US JULY HOME PRICES IN 20 METRO AREAS +0.6 PCT SEASONALLY ADJ (CONSENSUS +0.8) VS +0.9 PCT IN JUNE -S&P/CASE-SHILLER "
Matthew Graham : "Stronger into the Asia/Europe hand-off overnight, flat since then between 2.683 and 2.695"
Jeff Anderson : "Gm, all. Nice pop to start the AM. Is there news yet?"
Oliver Orlicki : "boy would I love to see 4 on the 30 YF in the near future"