Down To Business

By: Matthew Graham •

Here's the News That's Moving Markets Today:

1. Empire State MFG Survey

    This report was much higher than expected last month, and we had hoped that would be an outlier as opposed to a sign of economic recovery.  Today we were vindicated.  The consensus was for no growth at 0.0 and the actual report was released at negative 3.2.  Great News for MBS.

 

2. Jobless claims were almost dead on with expectations at 371k loss.  The consensus was a 370k loss.  This keeps the moving average very low and is another reassurance that we are indeed moving into deeper recession.  Good News for MBS.

 

3. Treasury International Capital.  The demand for  US securities from foreign buyers stood at 80.4 billion.  This is a high level of a demand, but is more of an effect than a cause as far as market movement is concerned.

4. Industrial production read at minus .7% as opposed to estimates of negative .3%.  This is in line with the Empire State survey and more edification for a weakening economy.  This is more good news for MBS.

5. Philly Fed Survey.  Though the contraction indicated by the negative 15.6 reading is better than estimates of a negative 20.0 reading, the fact that it is still negative (for a 6th straight month now) minimized the damage this report does to the MBS market.  We had some slight selling following this report, but nothing major.

6. Stocks.  Despite the weak data, stocks are being bolstered by a few key players.  The Dow is slightly positive on the day, which is preventing a massive improvement in MBS.

7. Flow considerations.  As the economy showed signs that it may be headed for a recovery over the last few weeks, traders forcefully withdrew their lower coupon MBS, especially the 5.0% coupon.  Now that we have the "mixed bag" again, traders have bought 5.0% coupons en masse.  The price on 5.0's is up over 1-15 currently!  That's a huge swing and will help discounted wholesale rates to come back into reach.  The 5.5, by comparison, is only up 12/32nds.

Float with these gains.  If housing starts and consumer sentiment is weak tomorrow, the gains will continue.  The stock market will play a key role for the rest of the day in helping us gauge reaction to the numbers.  If stocks start to climb, check back here and be ready to lock.  In the mid-term at least, if you have a few weeks before closings, floating will probably make you money.