MBS MID-DAY: 1/13/2011

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MBSonMND: MBS MID-DAY
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FNMA 3.5
95-08 : 0-01
FNMA 4.0
99-05 : 0-00
FNMA 4.5
102-10 : 0-01
FNMA 5.0
104-28 : 0-02
GNMA 3.5
95-32 : -0-01
GNMA 4.0
100-13 : 0-01
GNMA 4.5
103-15 : 0-03
GNMA 5.0
106-00 : -0-01
FHLMC 3.5
95-03 : -0-01
FHLMC 4.0
99-01 : 0-01
FHLMC 4.5
102-05 : 0-01
FHLMC 5.0
104-22 : 0-02
Pricing as of 11:00 AM EST
Market Updates
10:46AM  :  Pre-Auction Thoughts: Bias Slanted Slightly Toward Bull Camp
Liquidity is thin and price volatility has picked up this morning after yesterday's well-attended 10yr TSY note auction. There are all sorts of factors to consider as to why this is happening but those explanations seem far less important in the "here and now" when compared to how today's 30yr bond auction is received. The thing is, it probably doesn't need to be a super strong auction for the bond market to maintain its slightly bullish bias, which was created by a disappointing Employment Situation Report last Friday. As long as it's not a horribly weak auction that leaves the street bloated with inventory, we don't see the market offering outright suggestions that would be indicative of higher yields in the aftermath. Then again we don't see any major indications that the bond market is ready to make a rapid run toward lower yields either
10:42AM  :  REPRICE TARGETS
With a recurring low established at 102-08 in FNCL 4.5's and prices currently at 102-11, set your first reprice alert levels for a significant break below those lows for early reprices, around 102-06, and from there, increasing risk as 102-00 is approached. On the upside, first chances of reprices for the better at "mid-handle" of 102-16 or higher.
10:18AM  :  Anti-Inflation Rhetoric Heard in Emerging Economies
We expect to hear more anti-inflation rhetoric after South Korea raised interest rates on Thursday, surprising markets, and unveiled a set of measures to contain mounting inflation as policymakers around the world battle a surge in prices of food and other commodities.
10:01AM  :  Econ Data Ignored. Rates Traders Eye $13 Billion Bonds.
Although morning econ data generally favored lower interest rates, bond traders remain focused on underwriting the final Treasury auction of the week, which holds $13 billion 30 year bonds at 1pm. Trading volumes have been below average today, thus a lack of liquidity is contributing to choppy price action . The long bond is the weakest spot on the curve with a modest 1.4bps jump in yield. Production MBS coupons are outperforming
9:33AM  :  ALERT: 10 Yields Tick Up Sharply
10yr Tsy Yields Continue To Make Choppy Movements This AM, and with increasing magnitude. Yields abruptly shot up over 2bps in 30 seconds. This could spell risk of reprices for the worse among lenders who already had prices available this morning.
9:26AM  :  One in Every 45 U.S Homes Sees Foreclosure Filing in 2010
One in every 45 U.S. housing units was the subject of a foreclosure filing in 2010, a year in which a total of 3,825,637 such filings were recorded. Foreclosure filings include default notices, scheduled auctions and bank repossession. In all, 2,871,891 properties were affected by the filings, a new record. The numbers were reported by RealtyTrac on Thursday in its Year-End 2010 U.S. Foreclosure Market Report. The filings represented an increase of 2 percent from 2009 and 23 percent from 2008. FULL STORY: http://www.mortgagenewsdaily.com/01132011_foreclosures_realtytrac.asp
9:26AM  :  MBS Show Signs They Appreciate Treasuries Holding The Range
4.5's had been trending downward amidst choppiness in treasuries. After the recent bounce in 10yr yields just over 3.37, MBS showed their appreciation for treasuries holding the range by moving (albeit slightly) to their AM highs. This is merely to illustrate that as the day progresses, MBS will tend to respond positively to stability in benchmarks and NOT to suggest that stability will prevail this AM! (stay vigilant)
8:59AM  :  FDIC CHAIR: NOT EXPECTING REPEAL OF DODD-FRANK BILL
FDIC chairman Sheila Bair says would be surprised if major changes made to Dodd-Frank financial reform law. Bair says Dodd-Frank is a good bill, would create uncertainty to make any major changes to it
8:38AM  :  ALERT: Benchmarks At 2 Day Highs. Meeting Some Resistance There
Immediately following 830am Data, Benchmark 10yr note yields fell to their best levels since Tuesday, just under 3.35, but have thus far been unable to carry that momentum decisively lower in yield with another auction looming at 1pm. If they remain resisted by this technical level, look for support to attempt to develop between 3.37 and 3.39+
8:37AM  :  ALERT: Nov. Trade Deficit Smaller than Expected, Improved from Oct
US NOV TRADE DEFICIT $38.31 BLN vs. CONSENSUS $40.50 BLN). vs. OCT DEFICIT $38.42 BLN (PREV $38.71 BLN). NOV EXPORTS +0.8 PCT VS OCT +3.0 PCT, IMPORTS +0.6 PCT VS OCT -0.8 PCT
8:34AM  :  ALERT: Overall PPI Warmer Than Forecast. Core PPI on Screws
DEC PRODUCER PRICES +1.1% vs. CONSENSUS +0.8%. DEC PPI EX-FOOD & ENERGY +0.2% vs. CONSENSUS +0.2% DEC PPI INTERMEDIATE GOODS +1.0%; CORE +0.4%. PPI CRUDE GOODS +4.0%; PPI ENERGY PRICES +3.7%; PASSENGER CAR PRICES -0.4%; NOV PPI UNREVISED AT +0.8%
8:33AM  :  ALERT: US JOBLESS CLAIMS 4-WK AVG ROSE TO 416,500 JAN 8 WEEK FROM 411,000 PRIOR WEEK (PREVIOUS 410,750)
US CONTINUED CLAIMS FELL TO 3.879 MLN (CON. 4.095 MLN) JAN 1 WEEK FROM 4.127 MLN PRIOR WEEK (PREV 4.103 MLN) /// US NEW JOBLESS CLAIMS HIGHEST SINCE WK ENDED OCT 30; CONTINUED CLAIMS LOWEST SINCE OCT 25, 2008 (Source: Reuters)
8:32AM  :  ALERT: US JOBLESS CLAIMS ROSE TO 445,000 JAN 8 WEEK (CONSENSUS 405,000) FROM 410,000 PRIOR WEEK (PREVIOUS 409,000)
Source: Reuters
8:30AM  :  Oil extends gains to near $92/bbl on lower inventories
(Reuters) - Oil extended gains on Thursday to hold under $92 a barrel, buoyed by signs of higher demand after U.S. crude stockpiles fell more than expected and a cold snap swept through the U.S. Northeast, the region's largest heating oil market. http://www.reuters.com/article/idUSTRE6BD61U20110113
8:29AM  :  World stocks at 28-month high, bond sales smooth
(Reuters) - World stocks climbed to a new 28-month high despite weakness in Europe on Thursday while the euro held on to the previous session's gains as bond auctions in Spain and Italy went without a hitch. The bond auctions followed Wednesday's smooth sale of Portuguese debt and took the edge off concerns about the ability of debt-strapped euro zone issuers to fund themselves. Spain sold 3 billion euros of five-year bonds, raising the maximum amount targeted. The yield was higher than at a previous auction in November but lower than recent secondary market levels. http://www.reuters.com/article/idUSTRE7021N620110113
8:26AM  :  ECB keeps rates at 1 percent
(Reuters) - The European Central Bank will face a grilling on its assessment of the euro zone debt crisis and firming price pressures in the bloc after it left interest rates on hold at 1 percent on Thursday. The decision was correctly forecast by all economists polled by Reuters and keeps rates at the record low they have been at since May 2009. There was little reaction in markets, with the euro and bund futures little changed. http://www.reuters.com/article/idUSTRE70C2NM20110113
Featured Market Discussion
Brett Boyke  :  "good points, it is not adding fuel to the optimism fire as was the case in December at least and that is helping us stabilize"
Chris Kopec  :  "BB....I agree. I hope for good activity following the 30 year....but not sure if we need to clear Friday AM data (CPI, Retail Sales, Industrial Production) to make a run."
John Rodgers  :  "Brett, PPI has never been much of a market mover and it seems market movers are not as concerned with weekly claims as they were last summer. Like Adam said we are in a wait and see market. "
Adam Quinones  :  "BLS takes Establishment and Household Survey data from week that contains 12th day of month...this claims data covered the week ending Jan. 8"
Adam Quinones  :  "next week's print will though"
Adam Quinones  :  "BB this claims print doesnt really impact Feb. NFP"
Brett Boyke  :  "UE from this AM is pointing towards a negative NFP in Feb."
Brett Boyke  :  "JR very true, would have thought that the UE and PPI data would have had a bigger impact. Which leads me to believe that post auction we will see some action"
John Rodgers  :  "We have been so inoculated with volatility that the stability of this current market is unnerving. "
Brett Boyke  :  "interesting note from this AM - "As part of the most recent observations on the boil up (melt up is so QE1) in the S&P, we find something quite interesting. A quick glance at the chart below shows the general market 45% climb since Bernanke's leak of QE2 in August, as well as the market's 10 day (purple line) and 50 day (green line) moving averages. As a point of reference the S&P has been above the 10 day average for 30 days straight, and above the 50 day average for 92 days straight. What is r"
Adam Quinones  :  "REAL low no...low yes. liquidity is lacking, hence the choppy price action"
Jill Statz  :  "is volume real low again today? stagnate going into the auction again?"
John Rodgers  :  "Yes but prepare for long processing time. It just took them 70 days to close a deal for me."
Adam Dahill  :  "Does anyone know if 5th 3rd has landlord experience for new purchase of 3 fam? They have killer pricing right now"
Victor Burek  :  "flagstar same as reprce from yesterday"
Lion  :  "You know, sometimes when I read the banter on this board between Matt, AQ and the rest of you tecnos, it's like listening to my car mecahnic explain what is wroing and needs ot be fixed"
Matt Hodges  :  "yesterday, i think Case projected that to be true, then 2012 better, AD"
Jill Statz  :  "Wells is unchanged for pricing this morning ...same as yesterday after reprice at open"
Adam Dahill  :  "Who wants the over/under that 2011 will top 2010 in cases of foreclosures? "
Gus Floropoulos  :  "I'm seeing pricing improved by 5-10 bps on avg"
Victor Burek  :  "auction coming"
Adam Dahill  :  "VB- Why is the 10yr behaving like a baby this morning? yields should be down"
Jason York  :  ".85"
John Rodgers  :  "MI factor on a conv to FHA rate term < 90%?"
Jason York  :  "12 months after is the key"
Jason York  :  "yes"
John Rodgers  :  "If a borrower did a conv cash out over 12 months ago, can they do a FHA rate term today?"
Matthew Graham  :  "look at last night's 10yr chart, you have 3.37 as first support (speak of the devil), and then might expect the lower trendline to make a return appearance to be tested as support if a pre-auction concession gets a bit aggressive"
Matthew Graham  :  "10's ticking down, perhaps for another go at 3.34+ floor"
Matthew Graham  :  "markets testing the water of bid-bias post-nfp"
Aaron Meyer  :  "I'm not an economist so I could be wrong but I just don't see much improvement outside equities"
Aaron Meyer  :  "Housing hasn't bottomed and unemployment is not improving even the FED said 8.8% for the next 5 years"
Aaron Meyer  :  "No equities got ahead of themselves as they do when their is hope"
JTB  :  "Could so many of us be so wrong...is the global economy really steadily improving? "
Victor Burek  :  "boe kept rates same but said they will probably raise them sooner than people think"
Victor Burek  :  "read spain's went well"
John Rodgers  :  "How were the EU auctions?"
John Rodgers  :  "A lot of data coming in the next 36 hours so I doubt it. "
JTB  :  "GM..Positive or Negative, can the jobless claims, today, be significant enough to break the range? "