MBS MORNING: Marginal Improvements After Housing Data

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The S&P/Case-Shiller Home Price Index has been released.

The 20 city home price index was +0.00% in October. Worse than estimates of +0.2%.On a year over year basis the 20 city index is down 7.3%.

The 10 city home price index was also unchanged in October. On a year over year basis the 10 city index is 6.4% lower.

The west coast carried the load while home prices on the east coast were a drag.

This is the first time since April that the S&P/Case-Shiller HPI has not shown a month over month gain, likely a function of fading summertime seasonal support.  Plus the data was slightly worse than expected on a month to month basis. Year over year home price declines were expected.

While the overall theme provided by econ data is still supportive of a slow recovery in the housing market....the BOND BULLS get a slight advantage on this release, but nothing big enough to warrant a corrective rally in rates.

The sideways grind to the right at quarterly yield highs continues.The 3.375 coupon bearing semi annual paying 10 yr TSY note is trading +0-03 at 96-08 yielding 3.834. From the chart below you can that the housing data was beneficial to the bond market.

The FN 4.0 is +0-02 at 96-10 and the FN 4.5 is +0-02 at 99-17. Again, you can see that housing data was helpful.

Consumer confidence will be released at 10am. The market is expecting a read of 52.5.  After that, the next event is the 1pm release of the 5yr TSY note auction results.Here is a chart of 5yr note yields....December has not been pretty for 5s. Yields are up over half a point!

I know benchmark yields have risen considerably over the past three weeks. I know prices have cheapened significantly in the process.  But to be honest, I am stuck in the apathetic, "I see no reason to buy" until 2010 boat. I have yet to observe a strong enough signal that might sway my sentiment from defensive to speculative. I haven't gotten the "SWING AWAY" sign from the third base coach yet.

I would prefer to be slightly behind in a rally then stuck upside down in a sell off. "WAIT AND SEE" seems quite appropriate until the market goes back to work in the new year.