MBS MID-DAY: Running into Resistance
By:
•
MBSonMND: MBS MID-DAY
Open MBSonMND Dashboard | ||||||||||||||
|
|
|
||||||||||||
Pricing as of 11:01 AM EST |
Morning Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBSonMND Dashboard
.
10:58AM :
Infographic: The President's FY2012 Budget Breakdown
The attached infographic was created by the Obama Administration to illustrate the largest contributors to the budget deficit. In the months ahead we expect debate on the budget deficit to intensify which will undoubtedly lead to questions on cutting entitlements such as Social Security, Medicare and Medicaid. National Defense spending is also a target for deficit trimming. All four of these topics are expected to stir up controversy and potentially civil unrest in the process.
10:45AM :
First Attempt At 3.59's Fails For 10yr notes
We're getting into yield levels in 10yr notes that have limited technical resistance information ahead. The long term horizontal level is near 3.57, but we're not close enough to that yet to assess whether or not it remains significant. So we're left either evaluating horizontal levels based on yesterday's strongest marks or a diagonal trend of improving yields that connects the lows from the 9th and 11th. So far, the lowest yield from yesterday is holding as horizontal resistance as 10's recently reversed at 3.60 and are currently back at 3.61. The diagonal resistance, however, isn't much lower, at 3.59 A break below that would certainly be significant if seen with volume and suggest a test of 3.57. FNCL 4.5's are near their highs, currently at 100-27.
10:37AM :
U.S. Dec business inventories rose 0.8 percent - RTRS
U.S. DEC BUSINESS INVENTORIES +0.8 PCT (CONSENSUS +0.7 PCT) VS NOV +0.4 PCT (PREV +0.2 PCT) *** BUSINESS SALES +1.1 PCT VS NOV +1.4 PCT (PREV +1.2 PCT) *** INVENTORY/SALES RATIO 1.25 MONTHS' WORTH VS NOV 1.25 MONTHS *** INVENTORIES $1.44 TRILLION, HIGHEST SINCE JAN 2009 ($1.46 TRILLION); SALES $1.148 TRILLION, HIGHEST SINCE SEPT'08 ($1.154 TRILLION)
10:34AM :
Fed's Pianalto says job growth still anemic - RTRS
JOBLESS RATE HAS DECLINED A BIT RECENTLY BUT JOB CREATION REMAINS ANEMIC *** OVERALL ECONOMY GRADUALLY IMPROVING BUT STILL FACES HEADWINDS FROM HOUSING, WEAK INCOME GROWTH *** PACE OF ECONOMIC GROWTH WILL CONTINUE TO BE MODERATE THIS YEAR
10:31AM :
Builder Confidence Unchanged for Fourth Consecutive Month
February 15, 2011 - Builder confidence in the market for newly built, single-family homes remained unchanged at 16 for a fourth consecutive month in February, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. "While builders are starting to see more interest among potential home buyers, we are also dealing with a multitude of challenges, including competition from foreclosure properties and inaccurate appraisals of new homes, which are limiting our ability to sell," said NAHB Chairman Bob Nielsen, a home builder from Reno, Nev. "On top of that, an extremely tight lending environment continues to make it almost impossible to obtain credit for viable new and existing projects, and most do not see that situation improving anytime soon." On a positive note, two out three of the HMI's component indexes edged slightly upward in February. The component gauging current sales conditions improved by two points to 17, while the component gauging sales expectations in the next six months rose a single point, to 25. Meanwhile, the component gauging traffic of prospective buyers held unchanged, at 12.
On a regional basis, HMI scores were mixed in February, with gains reported in two parts of the country and declines in two others. The Northeast registered a two-point gain to 22, the South posted a one-point gain to 18, the Midwest posted a one-point decline to 12 and the West posted a two-point decline to 13.
10:18AM :
ALERT:
First Hints Of Reprices For The Better
In the past few minutes, 10yr notes have broken lower past the short term pivot point at 3.63. There's resistance ahead at 3.61, but in the context of this morning's recent range, this is a significant break lower. FNCL's are improved as well, with 4.5's currently hovering around 100-27. These gains are enough to see lenders who are already out with rates release reprices for the better, assuming these levels hold steady or higher for a while ("a while" varies from lender to lender, could be half an hour or several hours from case to case).
9:46AM :
MBS Make Moderate Gains, Nearing Yesterday's Highs
FNCL 4.5's had been sort of "stuck" in a 100-22 / 100-24 range following econ data, but have since ticked up to 100-25 / 100-26, just a tick off from yesterday's high. But further progress may be limited by benchmark 10's current battle with the 3.63 pivot. This has been a really pertinent line in the sand since Friday and yields are currently having a tough time getting lower.
9:36AM :
Foreign Holdings of U.S. TSY Debt Stable in December
Remember how bad December for the bond market? Well...December Treasury International Capital (TIC) data was released today. The TIC report tracks the flow of Treasury and agency debt securities in and out of the U.S on a monthly basis. We generally don't focus on individual months as a broader barometer of demand, but December was a rough month for rate watchers, so this data is of extra interest. Here is a quick recap: Net foreign purchases of U.S. Treasury bonds and notes was $54.6bn in December vs. $ 61.70bn in November. Not a huge drop off at all, suggesting the quick jump in interest rates was exaggerated by illiquid holiday trading conditions. China’s holdings of U.S. Treasury securities fell a modest $4bn to $891.6bn. This was the 2nd consecutive month of cuts made by China but still well above the 12 month low seen in June 2010 (843.7bn). Japan’s U.S. Treasury holdings increased for the 7th straight month, this time from $877.2bn in November to $883.6bn December. The U.K. recorded a sizable uptick in its holdings from $511.8bn in November to $541.3bn in December. U.K. TSY debt holdings increased in 11 of 12 months in 2010. Russia reported the largest reduction of U.S. Treasury securities, trimming its holdings from $122bn to 106bn.
8:53AM :
New MBS Commentary Post
8:40AM :
Morning Weakness Moderates In Bond Market Following Data
The 10yr note yield had been as high as 3.66 prior to the release of several economic reports this morning. FNCL 4.5's touched 100-19. Since the release of the data at 8:30am, the 10yr is at 3.64 and FNCL 4.5's at 100-22 versus 5pm levels of 3.62 and 100-24 respectively.
8:37AM :
DATA: Empire State Index Rises To 15.43 versus 15.00 Consensus
NY FED'S EMPIRE STATE BUSINESS CONDITIONS INDEX +15.43 IN FEB (CONSENSUS +15.00) VS +11.92 IN JAN *** EMPLOYMENT INDEX AT +3.61 IN FEBRUARY VS +8.42 IN JANUARY *** NEW ORDERS INDEX +11.80 IN FEBRUARY VS +12.39 IN JANUARY *** PRICES PAID INDEX +45.78 IN FEBRUARY VS +35.79 IN JANUARY *** SIX-MONTH BUSINESS CONDITIONS INDEX +49.40 IN FEBRUARY VS +58.95 IN JANUARY *** BUSINESS CONDITIONS INDEX AT HIGHEST SINCE JUNE 2010*** PRICES PAID INDEX AT HIGHEST SINCE AUGUST 2008
8:34AM :
DATA: January Import Prices Rise More Than Expected
JAN IMPORT PRICES +1.5 PCT (CONS. +0.8 PCT) VS DEC +1.2 PCT (PREV +1.1 PCT) *** EXPORT PRICES +1.2 PCT (CONSENSUS +0.7 PCT) VS DEC +0.6 PCT (PREV +0.7 PCT) *** PETROLEUM IMPORT PRICES +3.4 PCT VS DEC +4.3 PCT *** YEAR-OVER-YEAR IMPORT PRICES +5.3 PCT, EXPORT PRICES +6.8 PCT *** NON-PETROLEUM IMPORT PRICES +1.1 PCT, LARGEST SINCE APRIL 2008; YEAR-OVER-YEAR +3.2 PCT *** IMPORT PRICES UP 4.3 PCT OVER PAST 3 MONTHS, LARGEST 3-MONTH GAIN SINCE JUNE 2009 *** AUTO IMPORT PRICES +0.5 PCT, LARGEST RISE SINCE DEC 2007
8:32AM :
Retail Sales Misses Consensus, But Excluding Autos Up For 7th Straight Month
US JAN RETAIL SALES +0.3 PCT (CONSENSUS +0.6 PCT) VS DEC +0.5 PCT (PREV +0.6 PCT) *** EX-AUTOS +0.3 PCT (CONS +0.5 PCT) VS DEC +0.3 PCT (PREV +0.5 PCT) *** EX-GASOLINE +0.2 PCT VS DEC +0.4 PCT *** GASOLINE SALES +1.4 PCT VS DEC +1.8 PCT *** CARS/PARTS SALES +0.5 PCT VS DEC +1.5 PCT ***
7:50AM :
New MBS Commentary Post
Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBSonMND Dashboard
.
Jason Wilborn : "or overestimated how much available balance was on the credit card"
Adam Quinones : "goods producers overestimated the sustainability of consumer demand...???"
Adam Quinones : "HIGHEST SINCE SEPT'08 ($1.154 TRILLION) "
John Rodgers : "Inventories higher and building"
Chris Kopec : "AQ, I think publicly, the politicians express a distrust of bankers; privately, they express gratitude for their donations. We have chrony capitalism."
Adam Quinones : "nothing we can do about the changing regulatory environment though. we've tried. Consumers dont know what's really good for them and politicians dont trust the bankers. "
Chris Maas : "whats wrong with just educating the buyer and letting the chips fall where they may. educated buyers will weed out the faulty lenders."
John Rodgers : "I'm not angry, just burnt out."
Adam Quinones : "if youre still here it's for a reason. be the best and you will make a living."
Steven Stone : "i love all this new regulation...it means more and more people are going to give up and leave the mortgage business...bigger piece of a smaller pie for me"
Adam Quinones : "the only thing left is angry originators and less qualified borrowers."
Adam Quinones : "you guys act like you didnt know this was coming. Did you forget about the lynch mob that has been forcing folks out of this industry for the past three years?"
Gus Floropoulos : "Steve's comment rings some truth in it tho"
Adam Quinones : "NOTE: Steve's comment is not really one of the Fed's responses."
Steven Stone : "Q47. May a creditor make money anymore? A. Fed Response: No. The board views this as unfair to consumers. All compensation will now be paid directly to the government in the form of a new "We dont like you tax""
Adam Quinones : "Q21. May a loan originator pay some or all of the third party fees of a consumer or otherwise credit the consumer from a premium rate or out of his own pocket?
A. Fed Response - No. The rule prohibits overages and underages tied to terms including rate. The Board has concluded that if it did not prohibit lowering of loan originator compensation, the industry may establish high prices/compensation amounts, and then lower prices and compensation amounts for borrowers who negotiated. The Board vie"
Adam Quinones : "HERE WE GO."
Adam Quinones : "Q29. May a creditor charge fees to a loan originator by deducting the fees from the compensation due the loan originator when the loan originator fails to follow the creditor's
policy and, as a result, the creditor is not able to impose fees on the consumer under RESPA, which it would otherwise impose?
A. Fed Response - No. The Board views this as a variation in pricing or a concession akin to an underage that would be impermissible. However, the creditor can consider the error in resetting comp"
Adam Quinones : "the confusion arises in how lenders treat that guidance"
Adam Quinones : "key verbiage: "If a consumer agrees to pay the mortgage broker and lender directly, and asks the lender to pay some or all third party charges""
Adam Quinones : "A. Fed Response - Yes. The treatment of charges and credits for RESPA purposes has no bearing on the loan originator compensation rule. In this situation, for purposes of the loan originator compensation rule, the lender would be considered to have paid the third party charges and the consumer would be considered to have paid the broker's and creditor's charges.. "
Adam Quinones : "Q31. Under RESPA, any credit provided by the lender is first applied to the creditor's and broker's origination charges, and then any remainder is applied to third party charges. If a consumer agrees to pay the mortgage broker and lender directly, and asks the lender to pay some or all third party charges, the RESPA documents will reflect the credit from the lender as paying the lender's and broker's origination charges. Is the RESPA treatment of charges and
credits disregarded in all respects f"
Adam Quinones : "A. Fed Response - No. A broker may not adjust its compensation in this manner. The Board regards this as similar to a pricing concession which may not vary per loan. However, the creditor can consider the error in resetting compensation to the originator for future loans."
Adam Quinones : "Q30. A broker makes one or more mistakes in a Good Faith Estimate by improperly excluding certain fees and/or including fees at amounts that are below the correct amounts, and because of the tolerances under RESPA, the Good Faith Estimate cannot be revised to add the excluded fees or increase the fees that were disclosed at amounts lower than the correct amounts. Can the broker provide a credit to the consumer at closing to cover the excluded fees or improperly disclosed fees, which is a permiss"
Robert Rippy : "According to the lenders that I have gotten information from rebate does exist on borrower paid transactions"
Jim White : "JE I read that yesterday. I think you are right. It cannot be used to pay broker, but 3rd party is not addressed within the rule"
Jason Evans : "it is my understanding that the credit from the lender can not be used to pay for any broker fees..just third party"
Jason Evans : "anybody else see this article? i think the author is wrong http://www.scotsmanguide.com/default.asp?ID=4473∂=1
"
Mike Drews : "pricing this morning so far is between -.02 and .05 worse than yesterday's close..almost identical."
Jim White : "AQ. Forgot to say thanks for the micro post on TIC. As always you guys leave it simple enough for even me to understand!"
Steven Bote : "It still amazes that you guys were able to code the live pricing into the site itself."
Matthew Graham : "volume has been quite high this morning. we only have the 8am hour on the books so far, so the 9am hour will give a better day over day comparison, but the 8am hour was in line with the best volume seen in the past 6 sessions"
Matthew Graham : "In the past, I'd used the example of a dog on a leash. Treasuries are like the master, walking whatever course he/she may walk. MBS are like the dog who can either run out in front of the master or lag behind, but always somewhat connected. (the leash can "stretch" at times though)"
Matthew Graham : "as far as MBS vs Treasuries, they are both in the fixed income realm and thus tend to move in the same direction but not always in exact proportion"
Matthew Graham : "in a very general sense, fixed income tends to perform better when stocks perform more poorly, HOWEVER, there are multiple scenarios which lead to them moving in the same direction"
Matthew Graham : "First to Chris, WELCOME. Very complicated answer in terms of the space it could take, but to simplify, it's not safe to assume that either will or will not be connected at any particular point in the future"
Michael Kelleher : "matt how is the volume looking"
Chris Maas : "i'm a newbie to bonds. can someone give me a quick primer into which is more sensative to equities...MBS's or Treasury, and why MBS's become disconnected from Treasuries sometimes."
Adam Quinones : "
09:00 15Feb11 RTRS-U.S. DECEMBER NET LONG-TERM INFLOW (EX-SWAPS/OTHER) $65.9 BLN VS $85.10 BLN INFLOW IN NOVEMBER
"
Adam Quinones : "09:00 15Feb11 RTRS-U.S. DECEMBER NET OVERALL CAPITAL INFLOW $48.2 BLN VS REVISED $35.6 BLN INFLOW IN NOVEMBER
"
Jim White : "TIC Came in at 66? That was off"
Adam Quinones : "SO TIRED OF ASTERISKS: 8:49 (Dow Jones) January retail sales gain was half the expected increase, but it's hard to say how much of that was caused by weather. Three signs that snow and ice kept people at home and curtailed outdoor activity: the 1.2% gain in on-line shopping, 2.9% drop in sales at building supply stores and 0.7% decline in restaurant sales."