MBS MID-DAY: Rallying

Fannie 4.0's are roughly 4 ticks higher (.125) following the 10am economic data, now 7 ticks improved on the day at 100-19. 10yr notes fell from 3.00 to 2.973 during the same time. The movements in bond markets were quite well matched by similar movement in stocks--that is to say stock prices fell as bond yields fell. S&P's bounced at 1330, and while it's unclear whether or not that will be a firm floor for any length of time, it has coincided with a similar "pause" to the bond market rally. No major reversal of the rally though, which is good, but neither is it continuing. It might be challenging or even worrisome to see further strength in bonds given the 1pm Treasury Auction. Yields moving lower into an auction can make for a more challenging auction.

(Reuters) - U.S. consumer confidence edged higher in July as jitters over the outlook eased, though consumers remained gloomy about their current situations, according to a private sector report released on Tuesday. The Conference Board, an industry group, said its index of consumer attitudes rose to 59.5 from a downwardly revised 57.6 the month before. Economists had expected a reading of 56.0, according to a Reuters poll. June's figure was originally reported as 58.5. The expectations index rose to 75.4 from 71.6. Worries about the labor market continued to weigh on consumers, however, and the present situation index fell to its lowest level since February at 35.7 from 36.6. "Overall, consumers remain apprehensive about the future, but some of the concern expressed last month has abated," Lynn Franco, director of the Conference Board Consumer Research Center, said in a statement. Consumers' labor market assessment worsened. The number of respondents saying they found "jobs hard to get" rose to 44.1 percent from 43.2 percent the month before, while the "jobs plentiful" category held steady at 5.1 percent. Consumers also felt better about price increases with expectations for inflation in the coming 12 months falling to 5.7 percent from 6 percent. It was also the lowest level since February. (Reporting by Leah Schnurr, Editing by Chizu Nomiyama)

(Reuters) - New U.S. single-family home sales unexpectedly fell in June, but a sharp rise in prices and declining supply suggested the market for new houses was starting to stabilize, a government report showed on Tuesday. The Commerce Department said sales fell 1.0 percent to a seasonally adjusted 312,000-unit annual rate as sales in the Northeast tumbled to a record low. Sales were also pulled down by a sharp drop in the West. May's sales pace was revised down to 315,000 units from the previously reported 319,000 units. Economists polled by Reuters had forecast sales at a 320,000-unit rate. In the 12 months through June, new home sales rose 1.6 percent. Despite lean inventories, recovery in the market for new homes is being frustrated by a glut of previously owned homes, which are currently selling well below the cost of new construction. There were a record low 164,000 new homes available for sale in June. That compares to about 3.77 million used homes on the market in June, plus properties that are in foreclosure. The scarcity of new homes is encouraging builders to break ground on new projects. Data last week showed housing starts rose to a six-month high in June. The Commerce Department report showed the median sales price for a new home increased 5.8 percent last month to $235,200. Compared to June last year, the median price rose 7.2 percent. The rise in prices is the latest hopeful sign that home values are starting to stabilize. Data last week showed the median price of an existing home increased 0.8 percent to $184,300 from June last year. At June's sales pace, the supply of new homes on the market fell to 6.3 months' worth, the lowest since April 2010, from 6.4 months' worth in May. (Reporting by Lucia Mutikani; Editing by Neil Stempleman)

It's been a fairly quiet morning so far, not necessarily because volume is low (it's more like "medium"), but more so due to what seems like a much less intense batch of overseas and domestic headlines. But the market movement in 10yr notes is almost exactly the same magnitude as yesterday during the same time. Today however, it's just moving the opposite direction. Rounding a bit, yesterday from 8-930am, 10's went from 2.99 to 3.03, and today from 3.03 to 2.99. NOTE: There is a clear short term line in the sand at 2.99. We've bounced there a bit already. If yields can move down through 2.99, and stay there, that would be a good thing from technical standpoint. Fannie 4.0's are up 3 ticks (3/32nds) on the day at 100-14, right about the middle of yesterday's range. Case Shiller Home Prices are out, but were unchanged, and the two bigger reports, Consumer Confidence, and New Home Sales, are coming up at 10am. Stay Tuned!

(Reuters)(Reuters) - U.S. single-family home prices were unchanged in May, the first time in nearly a year they have not fallen on a monthly basis, though prices were still down compared to a year earlier, a closely watched survey said on Tuesday. The S&P/Case Shiller composite index of home prices in 20 metropolitan areas held steady on a seasonally adjusted basis and in line with economists' expectations, according to a Reuters poll. The last time the seasonally adjusted index rose month-over-month was in June 2010, shortly after the home buyer tax credit expired. On a non-seasonally adjusted basis, the index rose 1 percent, the second month of gains in a row, the report said. "This is a seasonal period of stronger demand for houses, so monthly price increases are to be expected," David Blitzer, chairman of the index committee at Standard & Poor's, said in a statement. "The concern is that much of the monthly gains are only seasonal." Prices in the 20 cities fell 4.5 percent year-over-year, which was also in line with forecasts. (Reporting by Leah Schnurr, Editing by Chizu Nomiyama)

Today's spectacle of a dysfunctional Washington, unable to tend to even its most basic task of protecting the nation's financial standing, may be appalling. It should not, however, be a surprise. The inability, after eight months' warning, to agree on any plan to deal with deficits and raise the nation's debt ceiling isn't some freak accident. Instead, it is the logical culmination of two giant trends in American politics: an unresolved debate over the size of government and the growing hyper-partisanship of Congress, particularly the House of Representatives. Put those two together and you end up with leaders of the two parties speaking, as they were over the weekend, of the need to "defeat them," as if the two parties were Cold War adversaries rather than partners in running the same nation. President Barack Obama, in a nationally televised speech last night, bluntly acknowledged how bad the picture looks to his countrymen, and to the world: "The American people may have voted for divided government," he said, "but they didn't vote for a dysfunctional government."