MBS Live: MBS Morning Market Summary
Check out the chart below for some rationale as to why this morning's very very high Jobless Claims number failed to help MBS and Treasuries gain any traction this morning.  We also discussed the likelihood of this data being ignored in this morning's commentary.  The 10am data stood more of a chance to help, and perhaps it did to some small extent.  Bond markets were already in the process of recovering from some very disconcerting morning weakness though.  The data simply didn't object to that.

Because of the timing of the weakness, many rate sheets came out in much worse shape this morning.  As the bounce back to "less bad" levels continues to hold, we're seeing the first few positive reprices.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
94-30 : -0-07
FNMA 3.5
99-08 : -0-08
FNMA 4.0
102-27 : -0-08
FNMA 4.5
105-28 : -0-06
GNMA 3.0
96-11 : -0-05
GNMA 3.5
100-17 : -0-09
GNMA 4.0
103-24 : -0-10
GNMA 4.5
106-17 : -0-08
94-23 : -0-07
99-03 : -0-09
102-19 : -0-09
105-22 : -0-09
Pricing as of 11:06 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 this morning.

11:03AM  :  Off The Lows; Waiting on Auctions
After some quick and fairly steep snowball selling this morning, bond markets have their feet underneath them to some small extent. MBS and Treasuries are still decidedly weaker on the day, but not as weak as they were.

Fannie 4.0s are down 7 ticks (vs 14 earlier) to 102-27 and 10's are up just over 4bps (vs 7 earlier) to 2.9291. These levels are right in line with long term pivots, and the real risk is that 10's will treat this as a floor of resistance for the rest of the day. The period following the 7yr auction at 1pm is the only time we can really know how that's shaping up.
10:13AM  :  ECON: Philly Fed Index Slightly Weaker Than Expected
- Business Conditions Index 7.0 vs 10.0 forecast
- New Orders 15.4 vs 11.8 previously
- Prices Paid 20.1 vs 29.9 previously
- Employment 2.2 vs 1.1 previously
- 6-month spending outlook 7.0 vs 17.2 previously

Market Reaction: Possibly somewhat helpful inasmuch as it's not a strong number that suggests further selling. New Orders were up though, so the data is more 'mixed' despite the 'weaker' headline.

Manufacturing growth in the region continued in December at a pace similar to that of November, according to firms responding to this month’s Business Outlook Survey. The survey’s broadest indicators for general activity, new orders, shipments, and employment were positive, signifying growth, and readings improved slightly in each category from November. The survey's indicators of future activity moderated slightly but continue to suggest general optimism about growth over the next six months.
10:09AM  :  ECON: Existing Home Sales Lower Than Expected
- Existing Home Sales 4.9mln Annual Rate vs 5.03 Forecast
- Median prices down to 196.3k from downwardly revised 197.5k in October

- Markets Reaction: Almost undetectable improvement in bond markets. Really nothing to write home about yet.

Existing-home sales fell in November, although median prices continue to show strong year-over-year growth, according to the National Association of Realtors®.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, dropped 4.3 percent to a seasonally adjusted annual rate of 4.90 million in November from 5.12 million in October, and are 1.2 percent below the 4.96 million-unit pace in November 2012. This is the first time in 29 months that sales were below year-ago levels.

Lawrence Yun, NAR chief economist, said the market is being squeezed. “Home sales are hurt by higher mortgage interest rates, constrained inventory and continuing tight credit,” he said. “There is a pent-up demand for both rental and owner-occupied housing as household formation will inevitably burst out, but the bottleneck is in limited housing supply, due to the slow recovery in new home construction. As such, rents are rising at the fastest pace in five years, while annual home prices are rising at the highest rate in eight years.”
8:52AM  :  ALERT ISSUED: Bond Markets Much Weaker Into Domestic Session; MBS Lagging
Treasuries were calm overnight, holding a narrow range between 2.878 and 2.90. As domestic traders started filing in for the morning, bonds began selling and 10yr yields have gradually ticked up to 2.933.

Unfortunately, there was a noticeable bounce at the inflection point near 2.92, and there's a risk this will now be treated as resistance (floor) going forward.

MBS are even worse off. Fannie 4.0s are already down another 14 ticks (almost half a point) in addition to the 14 ticks lost yesterday (102-20 at the moment).

Jobless Claims were weaker than expected, but it did nothing to help bond markets. This is snowball selling and it will either need to run its course or encounter exceptionally weak economic data at 10am. As far as "running its course" goes, that could happen any time or 10's could drift another 4bps higher, bringing MBS another .375 lower, give or take an eighth.
8:42AM  :  ECON: Jobless Claims Much Higher Than Expected
- Jobless Claims 379k vs 334k forecast, 369k previous
- Continued Claims 2.884m vs 2.78m forecast
- Market Reaction: Almost none, due to large seasonal distortions.

In the week ending December 14, the advance figure for seasonally adjusted initial claims was 379,000, an increase of 10,000 from the previous week's figure of 369,000. The 4-week moving average was 343,500, an increase of 13,250 from the previous week's revised average of 330,250.

The advance seasonally adjusted insured unemployment rate was 2.2 percent for the week ending December 7, 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 December 7 was 2,884,000, an increase of 94,000 from the preceding week's revised level of 2,790,000. The 4-week moving average was 2,799,000, an increase of 4,250 from the preceding week's revised average of 2,794,750.
Live Chat Featured Comments
A recap of the featured comments from the MBS Live Dashboard's Live Chat feature, utilized by hundreds of industry professionals each day.

Matthew Graham  :  ""Normally, this time of month is important for Jobless Claims as it covers the week in which the NFP survey takes place (the thinking goes that this "survey week" is more indicative of NFP). But that conventional relationship is thrown off by the time of year (Decembers are a different animal) and the fact that Claims have been volatile to the point of being silly.""
Erik Grimmer  :  "Jobless claims 55k worse than expected and rates getting merked"
Christopher Stevens  :  "yes the originator also. But If I lock at the wrong investor and have to move because I missed some obscure overlay that is costly in a rising rate environment. Let's not even talk about what will happen when we need to extend loans once the new LLPA's start hitting. That will also kill the bottom line. "
Christopher Stevens  :  "I am less concerned with higher rates and more concerned that every day my investors are changing their overlays and every investor seems to have their own spin on interpreting QM. Not fun for a secondary desk or u/w come January 10."
Gus Floropoulos  :  "I'm good with taper, good with yields rising to more normal levels, I'm not good with LLPA's or QM, or Gfees"
Matthew Graham  :  "Kelly, there is no specific event, data point, or headline behind this move. The simplest way to explain it is "snowball selling." The herd is spooked and running together. More join in as they go. The bigger it gets, the more join in. Some make an actual decision to join while others are forced to join due to constraints on their trading positions. In Treasuries, some join automatically with no human input other than the computer program that dictates at what levels to execute the sell-or"
JRS  :  "So we're almost at a point off the 4.0 in less than 24 hours. Nyeh..."
Chip Hooker  :  "either way, it's allot of selling in normally thin holiday volume....could get ugly fast"
Jeff Anderson  :  "Looks like MBS' must be on the naughty list this year. #bluechristmas"
Victor Burek  :  "surprised claims at least didn't stop the bleeding"
FPH  :  "A couple misses and we get worse?"
Kelly Zhang  :  "So the rate will keep going up? Anyone think it will drop a little bit?"
Matthew Graham  :  "not seeing anything beyond the same "potential seasonal volatility" yet Vic"
Victor Burek  :  "any disclaimer?"
Thomas Quann  :  "MG all over CNBC article this morning. I love it...."

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