MBS MID-DAY: Auction Concessions and Stock Lever

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MBSonMND: MBS MID-DAY
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FNMA 3.5
96-29 : -0-05
FNMA 4.0
100-29 : -0-03
FNMA 4.5
103-32 : -0-01
FNMA 5.0
106-15 : -0-01
GNMA 3.5
98-08 : -0-05
GNMA 4.0
102-17 : -0-03
GNMA 4.5
105-31 : +0-00
GNMA 5.0
108-12 : -0-02
FHLMC 3.5
96-31 : +0-02
FHLMC 4.0
100-26 : -0-03
FHLMC 4.5
103-27 : -0-01
FHLMC 5.0
106-10 : -0-01
Pricing as of 11:00 AM EST
Morning Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBSonMND Dashboard .
11:11  :  Auction Concession and Stock Lever Hurt Bonds
We've had some developments since Consumer Confidence data flashed just before 10AM (it came out early). At 1287, S&P futures are at their best level since last Wednesday while the 10-year Treasury note is at its weakest level since last Thursday. 10s are currently -7/32 at 101-14 yielding 2.954% (+2.5bps). There is one positive tidbit to share though, mortgages are still outperforming benchmarks. The Fannie Mae 4.0 MBS coupon is -3/32 at 100-29 after falling as far as 100-26 following the release of Consumer Confidence data. The stock lever is clearly putting pressure on the bond market, but rates aren't really fighting back as they have more recently, not with two more auctions to go today and tomorrow. Indeed the concentration of weakness in the bond market is indicative of an auction concession. Soon to be sold 5 and 7-year notes are the worst performers, backing up 4.4 and 3.9bps respectively. Plus the yield curve is steeper as auction supply is focused on the front-end. And mortgages are generally holding steady as short-sellers attack the belly of benchmarks. This tells us price action is likely short-term in nature (tactical auction concession), but also reminds us of the pending potential for price volatility where news headlines dictate directionality and determine a new bias in the broader marketplace. Our next major support level in 10s is 3.00%. There are several less influential inflections in between, but 3.00% is a level we don't want to break.
9:52AM  :  ECON: Consumer Confidence Continues to Decline
Consumer Confidence in June fell to 58.5 versus a revised 61.7 in May and a consensus of 60.5. Both the "present situation" and "expectations" components of the index have experienced continuing declines in recent months with the former down from 39.3 to 37.6 and the latter down from 76.7 to 72.4. Inflation expectations ticked down from a revised 6.5 in May to 6.0 in the current report. There was also a slight shift in 6 month income expectations with fewer consumers expecting income to increase and more consumers expecting income to decrease. Still, almost 70% continue to see their income unchanged.
9:46AM  :  ALERT: Rate Sheets Expected to Deteriorate on First Release
We have good news and bad news. The bad news is benchmark Treasury yields are rising and "rate sheet influential" MBS coupon prices are falling. The good news is MBS are outperforming Treasuries. The 10-year note is -5/32 at 2.947% (+1.8bps) but the Fannie Mae 4.0 MBS coupon is only -2/32 at 100-30. That means, if lenders build rate sheets right now, loan pricing would be flat to marginally worse. Unfortunately that doesn't include a cushion to protect against intraday volatility, which has been abundant lately. From that perspective, loan pricing could potentially deteriorate by as much as 25bps on first release today. There are several events influencing the broader market right now. First and foremost, bond investors are dealing with another round of Treasury auctions this week. At 1pm today Treasury will sell $35 billion 5-year notes. Increased debt supply in the open market tends to pressure benchmark Treasury and production MBS coupon prices lower. Second, ongoing drama in Greece remains a constant threat to equities, which means Treasuries could benefit from a "flight to safety" at any moment if a negative news headline prints. It also means Treasuries could lose their bid if positive news headlines print, which would be a bad thing for the best loan pricing of the year. In the more immediate future, Consumer Confidence data will flash at 10am. This is one of the first opportunities we'll have to digest June economic data and should set a tone for trading activity in the weeks ahead (Might not notice it today though, auctions and Greece headlines are stealing the spotlight.)
9:03AM  :  April Home Prices Dip, Spring Buying Helps - S&P
(Reuters) - U.S. single-family home prices dipped modestly in April, pointing to signs of stabilization in the battered housing market at the start of the spring buying season, a closely watched survey said on Tuesday. The S&P/Case-Shiller composite index of 20 metropolitan areas dipped 0.1 percent on a seasonally adjusted basis. A Reuters poll of economists had forecast a decline of 0.2 percent. On a non-seasonally adjusted basis, however, the index rose 0.7 percent, its first advance in eight months, the report said. "The seasonally adjusted numbers show that much of the improvement reflects the beginning of the spring-summer home buying season," David Blitzer, chairman of the index committee at Standard & Poor's, said in a statement. "It is much too early to tell if this is a turning point or simply due to some warmer weather." The excess amount of houses for sale, ongoing foreclosures, tight credit and weak demand have kept the housing market on the ropes even as other areas of the economy start to recover. Prices in the 20-city index fell 4 percent year over year, slightly worse than expectations for a drop of 3.9 percent. (Reporting by Leah Schnurr; Editing by Padraic Cassidy)
7:55AM  :  New MBS Commentary Post

UPDATED AT 11:33AM...

Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBSonMND Dashboard .
Adam Quinones  :  "stocks moving higher. S&Ps at session highs. +0.86% at 1287"
Matthew Graham  :  "RTRS RICHMOND FED SERVICES REVENUES INDEX -4 IN JUNE VS +9 IN MAY "
Matthew Graham  :  "RTRS - RICHMOND FED MANUFACTURING SHIPMENTS INDEX -1 IN JUNE VS -13 IN MAY "
Matthew Graham  :  "RTRS- RICHMOND FED COMPOSITE MANUFACTURING INDEX +3 IN JUNE VS -6 IN MAY "
Adam Quinones  :  "“In a welcome shift from recent months, this month is better than last - April’s numbers beat March,” says David M. Blitzer, Chairman of the Index Committee at S&P Indices. “However, the seasonally adjusted numbers show that much of the improvement reflects the beginning of the Spring-Summer home buying season. It is much too early to tell if this is a turning point or simply due to some warmer weather."
Adam Quinones  :  "speaking of the weather..."
Steven Stone  :  "whenever it rains...i get sad...so my confidence goes down"
Jason York  :  "and it was partially caused by the weather (don't forget the weather)"
Adam Quinones  :  "Says Lynn Franco, Director of The Conference Board Consumer Research Center: “This month’s decline in consumer confidence was driven by a less favorable assessment of current conditions and continued pessimism about the short-term outlook. Consumers rated both current business and labor market conditions less favorably than in May, and fewer consumers than last month foresee conditions improving over the next six months. Inflation fears eased considerably in June, but concerns about income prosp"
Adam Quinones  :  "Im still trying to figure out why it was on my screen at 940"
Matthew Graham  :  "RTRS - US CONSUMER CONFIDENCE INDEX AT LOWEST SINCE NOVEMBER 2010, EXPECTATIONS INDEX LOWEST SINCE OCTOBER "
Matthew Graham  :  "RTRS - US CONSUMER EXPECTATIONS INDEX 72.4 IN JUNE VS MAY REVISED 76.6 (PREVIOUS 75.2) - CONFERENCE BOARD "
Matthew Graham  :  "RTRS- - US CONSUMER PRESENT SITUATION INDEX IN JUNE 37.6 VS MAY 39.3 "
Matthew Graham  :  "RTRS - - US CONSUMER CONFIDENCE INDEX MEDIAN FORECAST FROM REUTERS FOR JUNE WAS 60.5 "
Matthew Graham  :  "RTRS - US JUNE CONSUMER CONFIDENCE INDEX 58.5 VS MAY REVISED 61.7 (PREVIOUS 60.8) - CONFERENCE BOARD "
Adam Quinones  :  "i recommend reading it. it will make you smarter. "
Adam Quinones  :  "That commentary was written by Brian Montgomery, former FHA Commissioner, and Karen Garner Wing, Special Advisor to The Collingwood Group and former HUD Quality Assurance Division Manager"
Adam Quinones  :  "HUD Enforcement: The Serious Business of Lender Oversight: http://www.mortgagenewsdaily.com/channels/voiceofhousing/217761.aspx"
Matthew Graham  :  "RTRS - US APRIL HOME PRICES IN 10 METROPOLITAN AREAS -3.1 PCT FROM YEAR AGO - S&P/CASE-SHILLER"
Matthew Graham  :  "RTRS - US HOME PRICES IN 10 METRO AREAS NON-ADJUSTED +0.8 PCT IN APRIL VS REVISED -0.8 PCT IN MARCH - S&P/CASE-SHILLER "
Matthew Graham  :  "RTRS - US APRIL HOME PRICES IN 10 METRO AREAS 0.0 PCT SEASONALLY ADJUSTED VS -0.1 PCT IN MARCH - CASE-SHILLER "
Matthew Graham  :  "RTRS - US APRIL 20-METRO AREA HOME PRICES NON-ADJUSTED +0.7 PCT (CONSENSUS +0.3) VS REVISED -0.9 PCT IN MARCH-S&P/CASE-SHILLER "
Matthew Graham  :  "RTRS - US APRIL 20-METRO AREA HOME PRICES -4.0 PCT (CONSENSUS -3.9 PCT) FROM YEAR AGO -- CASE-SHILLER "
Matthew Graham  :  "RTRS - US APRIL HOME PRICES IN 20 METRO AREAS -0.1 PCT SEASONALLY ADJ (CONSENSUS -0.2) VS MARCH'S REVISED -0.3 PCT --S&P/CASE-SHILLER"
Matthew Graham  :  "Right now Friday's break lower in 10yr yields looks to be in jeopardy of being rejected unless data and/or the auction are very bond-market-friendly"
Ira Selwin  :  "In case anyone is interested, CFPB posted revised versions of the GFE's again: http://www.consumerfinance.gov/knowbeforeyouowe/"