MBS MID-DAY: Tight Trading Range

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MBSonMND: MBS MID-DAY
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FNMA 3.5
95-27 : -0-03
FNMA 4.0
100-03 : -0-02
FNMA 4.5
103-13 : -0-01
FNMA 5.0
106-04 : -0-01
GNMA 3.5
97-09 : -0-02
GNMA 4.0
101-28 : -0-01
GNMA 4.5
105-08 : +0-01
GNMA 5.0
107-31 : -0-03
FHLMC 3.5
95-22 : -0-03
FHLMC 4.0
99-31 : -0-02
FHLMC 4.5
103-10 : -0-01
FHLMC 5.0
106-00 : -0-01
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 .
10:17AM  :  Limited Reaction to Econ Data. Waiting for Auction
It's nearly a full 3 hours until the 2yr Treasury Notes auction results are released. Between now and then it looks as if it will take more than this morning's economic data in order to motivate any significant movements outside recent ranges. Previous high yields in 10yr notes were around 3.155 to 3.16 with 3.095 on the opposite side of the range. Since the 830 data, yields have actually moved down a few bps despite the stock market generally strengthening.
10:07AM  :  ECON: Richmond Fed's Composite Index Down -6
The Richmond Fed's composite manufacturing index draws from shipments, new orders and employment. Index values greater than zero suggest expansion, while values less than zero indicate contraction. The Richmond Fed manufacturing index covers activity in the fifth Federal Reserve District, which includes the District of Columbia, Maryland, Virginia, North Carolina, South Carolina and most of West Virginia. In May, the index fell by 6 point versus readings of 10 and 20 in April and March. The shipments components of the index was down 13 points versus +6 in April. Perhaps a modicum of inflation information can be cleaned from the "prices paid" component rising from 4.81% to 6.12% in the previous month."
10:02AM  :  US April New Home Sales at 4-Month High
WASHINGTON, May 24 (Reuters) - New U.S. single-family home sales rose unexpectedly in April to notch their second straight month of gains and prices increased, according to a government report on Tuesday that offered some hope for the stagnant housing market. The Commerce Department said sales increased 7.3 percent to a seasonally adjusted 323,000 unit annual rate, the highest level since December, from a slightly upwardly revised 301,000-unit pace in March. Economists polled by Reuters had forecast new home sales unchanged at a previously reported 300,000-unit rate. All four regions recorded gains in sales, with the West reporting a 15.1 percent rise. However, compared to April last year sales were down 23.1 percent. An oversupply of used houses and a relentless wave of foreclosed properties are curbing the market for new homes, even as builders are keeping lean inventories. There were a record low 175,000 new homes available for sale last month, down 2.8 percent from the prior month. Data last week showed a steep drop in new home construction in April and a dip in sales of previously owned homes. The Commerce Department report the median sales price for a new home rose 1.6 percent last month to $217,900. Compared with April last year, the median price increased 4.6 percent. At April's sales pace, the supply of new homes on the market dropped to 6.5 months' worth, the lowest since April last year, from 7.2 months' worth in March. (Reporting by Lucia Mutikani; Editing by Neil Stempleman)
9:10AM  :  MBS Moderately Weaker. TSYs Reenter Previous Range
If you're a 10yr TSY yield, you just had another day spent testing 3.14 and are waking up to yet another failure this morning. Recall that 5/17 was a similar day in terms of yield movements where 10yr notes shot down to the 3.09's and had bounced back above he following day. This translates to a bit of weakness for MBS as FNCL 4.5's are down 2 ticks on the day at 103-12. At these prices, we'd expect loan pricing to come in slightly weaker than yesterday. Reprices for the better will be doled out more conservatively than normal ahead of the known-market-mover, the 2yr Note Auction. 103-07 is the center of the next reprice risk zone, so even 103-08/09 should serve as some sort of early warning sign for "early-to-act" lenders.
8:34AM  :  Fed's Duke: Gas Prices Crimping Consumers
BOSTON, May 24 (Reuters) - U.S. consumers, already hard hit by a sharp collapse in home prices, are facing renewed challenges from higher gasoline costs, Federal Reserve Governor Elizabeth Duke said on Tuesday. In remarks focused primarily on financial literacy, Duke offered some flavor of her views on the economy. Her tone was not very optimistic, suggesting she is unlikely to begin pressing for interest rate hikes any time soon. "Family incomes have not kept pace with rising costs, and many families, particularly those with low-to-moderate incomes, are actually facing the decision between buying gas to drive long distances to work and paying their mortgage," Duke said in the remarks, which were prepared for delivery at a conference sponsored by the Boston Fed. Weaker house prices and the resulting difficulties in selling a home have made it harder for Americans to move in search of work, she said, thus further reducing demand for home ownership. "Foreclosures remain high in these areas where the cost of driving to work has become so great," she added. After a retreat in crude oil prices, U.S. gasoline costs fell to $3.85 a gallon in the latest week, the lowest level in five weeks, the Energy Department said on Monday. Although prices are down 11.1 cents from the previous week, the national gasoline price is still $1.06 higher than a year ago. The U.S. economy appears to have hit a soft patch in recent months after several quarters of strong growth. U.S. gross domestic product expanded at an annualized rate of just 1.8 percent in the first quarter. (Reporting by Ros Krasny; Writing by Pedro Nicolaci da Costa; Editing by Leslie Adler)
7:13AM  :  New MBS Commentary Post

UPDATED AT 11:21AM

Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBSonMND Dashboard .
Andrew Horowitz  :  "if the yuan was freely traded my answer might be differetn"
Andrew Horowitz  :  "the euro weakens strength has to go someplace, it can't go to the yuan so makes sense to me"
Aaron Buyside Meyer  :  "I was talking to an Axa financial planner yesterday who manages just under $100M and he couldn't figure out why the dollar was gaining strength, maybe it is just his opinion that we are just as bad as soem of the European countries. "
Andrew Horowitz  :  "ABM the weaker the dollar the cheaper the cost of stocks and commodities"
Andrew Horowitz  :  "check it out, dollar goes up stocks and commodities sell off bonds rally and the inverse trade has applied as well"
Andrew Horowitz  :  "have you noticed the dollar leading everything lately?"
Chris Kopec  :  "I think a new stand-alone appriasal bill is required. The provisions in Dodd-Frankenstein have been ignored (portability, fees, etc)."
Adam Quinones  :  "well. let's address the real problem. not work around it...."
Chris Kopec  :  "Sure, AQ....if that were the case, I'd agree. But since we've got Dumb & Dumber as our official appraisal policy, I'm in favor of some guard rails."
Adam Quinones  :  "using competent appraisers who know the local market is the solution."
Adam Quinones  :  "location, location, location. Sometimes short-sales and foreclosures s/be used. Sometimes they shouldnt."
Adam Quinones  :  ""predominance" is the word right?"
Chris Kopec  :  "My point: non-distressed sales - both new and existing homes - already reflect the market presence of distressed properties."
Adam Quinones  :  "im not getting into this debate. you know better than to make a broad sweeping statement about appraisal comps. "
Chris Kopec  :  "Seriously....look at the last report on existing home sales, then. Strip out the foreclosures/shorts, and look at the sales data on non-distressed."
Adam Quinones  :  "*too"
Adam Quinones  :  "Owl. Do not base any arguments off of New Home Sales data. The survey sample is far to small."
Chris Kopec  :  "Median new home sales prices +1.6% from last month.....further support for my argument that foreclosures/shorts should be quarantined from appraisals."
Andrew Horowitz  :  "all the regional mfg numbers have been weaker than expected"
Victor Burek  :  "another weak manufacturing report"
Adam Quinones  :  "Today 10:00 - US APRIL SINGLE-FAMILY HOME SALES 323,000 UNIT ANN. RATE (CONS 300,000) VS MARCH 301,000 (PREV 300,000) Today 10:00 - US APRIL SINGLE-FAMILY HOME SALES +7.3 PCT VS MARCH +8.3 PCT (PREV +11.1 PCT) Today 10:00 - US APRIL HOME SALES NORTHEAST +7.7 PCT, MIDWEST +4.9 PCT, SOUTH +4.3 PCT, WEST +15.1 PCT Today 10:00 - US APRIL NEW HOME SUPPLY 6.5 MONTHS' WORTH AT CURRENT PACE, LOWEST ONE YEAR, VS MARCH 7.2 MONTHS Today 10:00 - US APRIL MEDIAN SALE PRICE $217,900, +4.6 PCT FROM APRIL 2010 "
Dustin McAlister  :  "guidelines, lock extension costs..."
Ira Selwin  :  "DM, curious what would make you choose one investor over the other. Wouldn't you just take the best price?"
Andrew Horowitz  :  "more fun out of congress, http://www.washingtonpost.com/business/economy/gop-proposes-increase-in-fha-down-payments/2011/05/23/AF3NX69G_story.html article says it won't pass but still the fact that some are even thinking this at this point in time is ludicrous"
Dustin McAlister  :  "through secondary, typically they don't mess with particular rates, they just have a flat hold back on everything depending on loan amount....we see the different investors however we don't see the raw pricing we saw what they are will to do in rebeate/discount"
Dustin McAlister  :  "If anyone else notices the same thing with the WF pricing i would be curious to know or if maybe it was our own bank doing it. "
Dustin McAlister  :  "was there anything in particular that would have caused them to pick today to do that? the auctions? "
Matthew Graham  :  "looks like that particular lender is setting up a pretty steep hedge against producing 4.0 MBS"
Dustin McAlister  :  "question. I expected to lose about an .125% this morning. My rebate on 4.75% was reduced by .125% (va 30 year fixed) but the discount for 4.5% went from .25% last night to 1% this morning with wells..."