Bond markets were just slightly weaker overnight, but Treasuries held inside Friday's range at first. Fannie 3.5 MBS opened just in line with Friday's lows. Both managed to improved slightly into the 930am Stock market open, but began weakening from there. Volume and volatility are low. Overnight activity was exceptionally light--even for a Monday--and there's an increasingly clear sense that all eyes are indeed on tomorrow's jobs report.
The morning's only significant data release--Existing Home Sales--was slightly weaker than expected, but tradeflows surrounding the stock market open and the Fed's scheduled Treasury buying operation trumped any trading cues from the data. In a broader sense, today's weakness looks merely like an incidental leveling-off for last week's post-debt-deal rally.
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 11:09 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
Holding Sideways Since Last Alert
Just a heads-up that MBS haven't experienced any additional losses since the last alert, and in fact are 1 tick higher at the moment. 10yr yields are similarly improved over the same time, having fallen to 2.605. We're not dealing with massive movement hear, but it reinforces the limited nature of earlier reprice risk.
MBS Hit New Lows; Negative Reprice Risk Already Increasing for Some Lenders
Fannie 3.5s just hit new lows for the morning, down 6 ticks at 101-29. This is far enough from some lenders' initial rate sheet print times to consider some negative reprice risk. 10yr yields are up 2.3bps at 2.6123.
All of the above is very much within the narrow, sideways range that dominated late Sep and early Oct, and is more a factor of Friday's strength returning to the trend than it is a statement about "new weakness." This morning's Existing Home Sales data hasn't been a factor as the volume and movement was primarily seen on either side of the data (as opposed to lining up with the data).
The tacit implication is that some of the volatility could relate to the Fed's scheduled Treasury buying operation, in which case, we could see it shift around 11:02am. Between now and then, reprice risk is light to moderate for some lenders--not pronounced unless we lose several more ticks.
ECON: Drop in Existing Home Sales is in Line with Expectations
- Sept Sales at 5.29 mln annual rate vs 5.30 forecast
- Aug sales revised down to 5.39mln from 5.48 mln
- Inventory +1.8 pct to 2.21 mln units
- First year-over-year increase in inventory since 2011
- Median price drops from $209k to 199k
- 14 pct distressed sales vs 12 pct previously
- Market Reaction: Stock prices higher and bond markets weaker, despite negative revision and headline miss.
After hitting the highest level in nearly four years, existing-home sales declined in September, but limited inventory conditions continued to pressure home prices in much of the country, 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, declined 1.9 percent to a seasonally adjusted annual rate of 5.29 million in September from a downwardly revised 5.39 million in August, but are 10.7 percent above the 4.78 million-unit pace in September 2012. Sales have remained above year-ago levels for the past 27 months.
Lawrence Yun, NAR chief economist, said a decline was expected. “Affordability has fallen to a five-year low as home price increases easily outpaced income growth,” he said. “Expected rising mortgage interest rates will further lower affordability in upcoming months. Next month we may see some delays associated with the government shutdown.”
Bond Markets Gently Weaker Overnight; Holding Ground so Far
Treasury trading in the overnight session proved to be an uneventful, low-volume extension of Friday afternoon's momentum. 10yr yields clung to Friday's range throughout and are currently half a bp higher at 2.5941.
MBS are a bit weaker by comparison, but still inside Friday's range at 102-00 for Fannie 3.5s. MBS, especially, can be a bit "groggy" on slow Monday mornings in that the number of active buyers and sellers doesn't connote a "bustling marketplace" just yet. As such, some movement of 2-3 ticks at a time is possible until/unless activity picks up.
Part of the atmosphere of reservation could have to do with tomorrow being NFP day instead of Friday October 4th. NFP is the biggest potential market mover every month. Not only is that doubly true this month, but bond markets are right on the edge of a range breakout, so there's extra reason to "wait and see."
Despite the majority of the focus being on tomorrow morning's data, we will get Existing Home Sales this morning at 10am. That's it in terms of economic data.
Live Chat Featured Comments
John McClellan : "They are open....but back logged"
John McClellan : "With the passage of the continuing resolution to keep the Federal Government funded until January 15, 2014, implementation of the 2010 Census Data for USDA eligible areas has been postponed for the duration of the continuing resolution. Existing eligible areas for the USDA Rural Housing program will remain eligible until such time."
Dirk Postupack : "Has anyone heard if USDA is going to be funding loans thru the end of this year or not?"
Jason Anker : "FPH DU aprove 48% dti last week on an 80% purchase. "
Matthew Graham : "Yeah, counterintuitive, but most of the movement coincided with stock open, and most recently, beginning of Fed buying operation. EHS doesn't look to be a huge factor today."
Joe Moran : "so negative housing news and its WEAKER for bonds?"
Dan Clifton : "just got my first 4506 TRV back post shut down, I had placed it right after shu down occured"
FPH : "yeah, im on a cash-out. so I have no assets to show. 35 ltv loan that I can get to work."
Jason Zimmer : "as of two weeks ago, yes. 12 months reserves"
FPH : "can a DU approval be obtained on a DTI over 45% ever anymore?"
Matthew Graham : "RTRS- US SEPT NATIONAL MEDIAN PRICE FOR EXISTING HOMES $199,200, +11.7 PCT FROM SEPT 2012, SMALLEST RISE IN 5 MONTHS "
Matthew Graham : "RTRS- US SEPT EXISTING HOME SALES 5.29 MLN UNIT ANNUAL RATE (CONS 5.30 MLN), VS AUG 5.39 MLN (PREV 5.48 MLN)-NAR "
Matt Hodges : "oct on 11/8"
Matt Hodges : "sept released tomorrow"
FPH : "WIll October NFP # be released along with Novembers next week?"