Bond markets came into the domestic session in slightly weaker territory, carrying some negative momentum from European hours. Volumes were low, however, and the losses weren't steep. When the bond pit opened at 8:20, losses were reversed. MBS were just warming up for the day at that time and followed Treasuries to yesterday's best levels. This move didn't pay much heed to the equivocal Durable Goods data at 8:30. Both MBS and Treasuries weakened a bit heading into the 9am hour, but 10yr yields bounced at overnight highs and have progressed steadily lower since. MBS have done a good job of keeping pace and remain solidly in positive territory ahead of the 5yr Treasury auction.
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
ECON: New Home Sales Bounce Back As Expected
- Single Fam Sales 421k Annual Pace vs 420k forecast
- July revised lower to 390k from 394k
- "West" region -14.6 pct
- Market Reaction: Limited reaction so far, if any reaction at all. Neither Treasuries or MBS have done anything with the data so far, and they can be forgiven for this considering the data was even more equivocal than Durable Goods.
Sales of new single-family houses in August 2013 were at a seasonally adjusted annual rate of 421,000, according to
estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.
This is 7.9 percent (±14.6%)* above the revised July rate of 390,000 and is 12.6 percent (±15.3%)* above the August
2012 estimate of 374,000.
The median sales price of new houses sold in August 2013 was $254,600; the average sales price was $318,900. The
seasonally adjusted estimate of new houses for sale at the end of August was 175,000. This represents a supply of 5.0
months at the current sales rate.
Bond Markets Near Unchanged Levels After Quiet Overnight Session
Treasuries began the overnight session trading flat during Asian hours in quiet trading. Activity picked up somewhat into European hours with stocks and bond yields at 3am, bottoming out by 4am.
Since then, Treasuries have gradually weakened, stopping precisely at overnight high yields, just under 1bps higher than Tuesday's latest yields (currently 2.66%).
The Durable Goods report was actually a net-positive for bond markets, acting to briefly slow down the preexisting selling trend, together with buyers lined up at the 8:20am CME open 10 minutes earlier, but it wasn't enough to turn the very gentle tide of morning selling.
MBS began the day a few ticks into weaker territory and in concert with Treasuries just after 8:20am and similarly began selling with Treasuries just after 8:35am. None of the weakness has been too severe and Fannie 3.5s are actually 1 tick into positive territory at the moment.
The equivocal Durable Goods report places a bit more emphasis on the morning's remaining data, namely, New Home Sales at 10am.
There's an active corporate bond market environment behind the scenes today. The two important phases in corporate debt issuance as far as we're concerned, are "rate-lock selling" (where companies may sell Treasuries to lock in their effective borrowing rate) and "rate lock unwinds" (where companies buy back the Treasuries they sold earlier after the deal has been officially priced).
These phantom forces don't adhere to a set schedule, but can have enough of an impact to dictate pockets of trading activity throughout the day. From here on out, we should see more of the 2nd phase mentioned above (rate-lock unwinds) which would benefit MBS indirectly. This would have to be balanced against any preemptive selling that makes room for the 5yr Treasury auction at 1pm.
ECON: Manufacturing Orders Buoyed by Automotive Sector
- Durable Goods Orders +0.1 vs +0.0 Forecast
- Last month's report revised to -8.1 from -7.4
- Excluding auto sector, orders -0.1 vs +1.0 forecast
- In other words, economists had been expecting orders for manufactured goods to increase by 1 pct when the transportation sector was excluded, but orders instead declined slightly, making the report more mixed than positive.
From the Census Bureau:
"New orders for manufactured durable goods in August
increased $0.3 billion or 0.1 percent to $224.9 billion,
the U.S. Census Bureau announced today. This increase,
up four of the last five months, followed an 8.1 percent
July decrease. Excluding transportation, new orders
decreased 0.1 percent. Excluding defense, new orders
increased 0.5 percent.
Transportation equipment, also up four of the last five
months, drove the increase, $0.5 billion or 0.7 percent to
$67.9 billion. This was driven by Motor vehicles and
parts, which increased $1.1 billion."
Live Chat Featured Comments
Matthew Graham : "RTRS25-Sep-2013 07:00 - US AUG SINGLE-FAMILY HOME SALES 421,000 UNIT ANN. RATE (CONS 420,000) VS JULY 390,000 (PREV 394,000)"
Gus Floropoulos : "great bullet points and technical analysis in the day ahead MG!"
Victor Burek : "we don't JR, a TBD address doesn't equal a complete loan app"
John Rodgers : "they are wrong"
Jason Anker : "JR - yes. 100%, lawyers at my shop and Wells both said it must be done"
John Rodgers : "if you do a pre approval and do not have a address you send declination letters?"
Matt Hodges : "it seems WF had that dubious distinction previously. it's a false number, but it does play into proper pre-qualification of a client as well as pre-screening. I don't mean not assisting someone, but you ask gentle questions about credit history prior to pulling CR as well as taking a loan app"
Jason Anker : "chase may also decline incomplete files rather than withfrawing them for compliance simplicity. "
Ira Selwin : "It may be SV, but it also may be that due to their big name they get more people that think they qualify and dont"
Jason Anker : "my guess and it's a guess is that number is based on compliance policy and not guidlines"
Jason Anker : "they commented on that in the article"
Scott Valins : "my thought was if Chase is rejecting almost twice as many apps as the next bank they are the worst. I get the idea that being strict and selective can be a good thing but something seems wrong when the numbers are that far off"
Matthew Carver : "denied is only one variable in many needed to really see who is doing what."
Matthew Carver : "I'd love to see the total % of fallout including withdrawn due to 90+ days in processing "
Jason Anker : "for what its worth that stat can be very misleading"
Ira Selwin : ""worst" is subjective no?"
Scott Valins : "interesting news stream article that ranks the loan rejection rates of the big banks. Chase far and away the worst. "
Matthew Graham : "yeah, was just going to respond to OO, not really "bad," but not good either. Market reaction already beat me to that punch though. If anything, I think the fact that the ex-autos numbers were negative vs a +1.0 forecast is the story."
Erik Grimmer : "This data seems so so.....not good or bad. What are your thoughts mg?"
Matthew Graham : "RTRS- U.S. AUG DURABLES EX-TRANSPORTATION ORDERS -0.1 PCT (CONS +1.0 PCT) VS JULY -0.5 PCT (PREV -0.8 PCT) "
Matthew Graham : "RTRS- US AUG DURABLES ORDERS +0.1 PCT (CONSENSUS UNCHANGED) VS JULY -8.1 PCT (PREV -7.4 PCT) "