MBS opened just a tick under yesterday's latest levels and have mostly moved weaker from there. Treasuries similarly started the day just above yesterday's highest yields and moved higher as the day progressed. In both cases the weakness hasn't been enough to challenge yesterday's weakest levels, thus setting today up as an "inside day" (today's highs and lows fall "inside" yesterday's--signifies consolidation and break from previous momentum).
The morning's economic data didn't help the cause with Jobless Claims coming in much lower than expected and the Labor Department going out of their way to say that there were no latent computer upgrades causing data processing issues. GDP remained at the 2.5% reported at the first revision. There were some weaker internal components but nothing panic-inducing. The next hurdle is the 7yr Auction coming up at 1pm. Sometimes the end of a weekly auction cycle will result in sigh of relief in bond markets (because investors no longer need to make room to buy additional Treasury debt, or wonder about the extent to which others are doing the same). If we don't see that this time, it would further confirm that momentum has shifted sideways here.
(Note the timestamp in the table below. Pricing has since weakened roughly an eighth of a point in Fannie 3.5s)
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
Bond Markets Lose Ground After Data; MBS Outperform
MBS began the morning in roughly similar territory to yesterday's latest levels. That followed an overnight session in Treasuries that was largely uneventful with highs and lows falling inside yesterday's range.
Selling began well before data, with Treasury yields moving higher from 6am. When the data arrived, stronger-than-expected Jobless Claims were the primary motivator to continue the selling trend. GDP was close enough to consensus to be read either way as far as short term trading motivations are concerned.
There are two potential silver linings to the weakness:
1. It has, thus far, affected Treasuries more than MBS. 10yr yields are more than halfway back to yesterday's highs whereas MBS prices are noticeably less than halfway back to yesterday's lows.
2. The overall magnitude of selling has been fairly minimal (even Treasuries remained contained inside yesterday's range) and may already be showing signs of support (bouncy ceiling potential at 2.656%).
Pending Home Sales at 10am is less relevant in terms of data but could have a slight impact. After that, auction-related flows will contribute to the afternoon momentum.
ECON: Final Q2 GDP Remains at 2.5 Percent
- GDP +2.5 vs +2.6 Forecast, +2.5 Previously
- Few internal components were meaningfully changed
- Core PCE +0.6 vs +0.8 Forecast, smallest gain since Q209
- Market Reaction: Reacting more to Jobless Claims.
Real gross domestic product -- the output of goods and services produced by labor and property
located in the United States -- increased at an annual rate of 2.5 percent in the second quarter of 2013
(that is, from the first quarter to the second quarter), according to the "third" estimate released by the
Bureau of Economic Analysis. In the first quarter, real GDP increased 1.1 percent.
The GDP estimate released today is based on more complete source data than were available for
the "second" estimate issued last month. In the second estimate, the increase in real GDP was also 2.5
percent. With the third estimate for the second quarter, the general picture of economic growth remains
largely the same.
The increase in real GDP in the second quarter primarily reflected positive contributions from
personal consumption expenditures (PCE), exports, nonresidential fixed investment, private inventory
investment, and residential fixed investment that were partly offset by a negative contribution from
federal government spending. Imports, which are a subtraction in the calculation of GDP, increased.
The acceleration in real GDP in the second quarter primarily reflected upturns in exports and in
nonresidential fixed investment, a smaller decrease in federal government spending, and an upturn in
state and local government spending that were partly offset by an acceleration in imports and
decelerations in private inventory investment and in PCE.
ECON: Jobless Claims Much Lower Than Expected; No "Yeah But" This Time
- Claims fell to 305k vs 325k Forecast
- Previous week revised to 310k from 309k
- Past two claims reports have had "explanations" from the Labor Department as to why they were so low. This one says those temporary factors (backlogs in 2 states due to computer upgrades) are no longer a factor, so the headline 305k is ostensibly real. Markets reacting accordingly. MBS and Treasuries slightly weaker.
In the week ending September 21, the advance figure for seasonally adjusted initial claims was 305,000, a decrease of 5,000 from the previous week's revised figure of 310,000. The 4-week moving average was 308,000, a decrease of 7,000 from the previous week's revised average of 315,000.
The advance seasonally adjusted insured unemployment rate was 2.2 percent for the week ending September 14, an increase of 0.1 percentage point from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending September 14 was 2,823,000, an increase of 35,000 from the preceding week's revised level of 2,788,000. The 4-week moving average was 2,842,500, a decrease of 42,750 from the preceding week's revised average of 2,885,250.
Live Chat Featured Comments
Matthew Graham : "CFPB non-QM dude has been in the news for closer to 4 months. http://www.mortgagenewsdaily.com/channels/pipelinepress/06102013-mortgage-banking-raj-date.aspx and http://www.mortgagenewsdaily.com/08012013_cfpb_house_investigations.asp"
Jason Anker : "yes, MG has the name"
Matthew Carver : "I heard yesterday there is a player emerging that will buy non-QM loans on the secondary side next year, (ex-CFPB guy) anyone know who this is or heard anything similar?"
Christopher Stevens : "Stevens (MBA President) said he thinks the reductions will be $417k to $400k and $625k to $600k"
Christopher Stevens : "just another way to try and get the private mortgage market involved just like raising g-fees"
Victor Burek : "that's basically what I meant..less risk due to smaller footprint"
Christopher Stevens : "I think the possible reduction of loan limits has more to do with reducing the government’s footprint in the mortgage market and less to do with risk. "
Steven Stone : "loan limits are supposed to be tied to median home prices. they have been at 417 for a long time because they didn't want to cut them during the housing crisis even though prices were declining"
Matthew Graham : "RTRS- U.S. AUG PENDING HOME SALES INDEX -1.6 PCT (CONSENSUS -1.0 PCT) TO 107.7 -REALTORS "
John Tassios : "wow, Pending Home sales went down again"
Gus Floropoulos : "u need a prior approval from the investor when its a lit"
Gus Floropoulos : "sometimes the management company cures the problem and sues to recoup costs. if they cured the issue its a win win"
Gus Floropoulos : "if it's not against the building or HOA, any lender will do it for the most part as long as the damage isnt conflicting with operations and owners paying their common charges"
Jeff Kalb : "HOA suing Developer for common area stuff, parking lot, planters in plaza, rust on deck railings, been going on for 5 years, "
MMNJ : "slip and fall is one thing -- lawsuit against builder for using Chinese drywall is another...."
Gus Floropoulos : "and if those lenders have closed in the last 90, try them, no?"
Gus Floropoulos : "depends what the lit is about Jeff"
Jeff Kalb : "Anyone know who can do a condo with litigation (not construction or individual units)? Wells, Citi and Nationstar have all done deals in the last 3 months.CA property"
Jeff Anderson : "This week's number is the number. We've been trending lower. But it doesn't mean the job market is any better or worse from last month. NFP in a couple weeks will tell some of that story. Revisions should be interesting."
Matthew Graham : "It wasn't a filing backlog, it was a reporting backlog"
Matthew Graham : "no, this week we're being told claims = claims"
Andrew Benson : "... or are we supposed to believe that the backlog is included in this week's claims, and therefore this week's claims really would have been much lower without them? "