MBS MID-DAY: 9/19/2011

(Reuters) - U.S. homebuilder sentiment dipped in September with an industry index mired in a low range as the housing market continues to struggle, the National Association of Home Builders said on Monday.

The NAHB/Wells Fargo Housing Market index slipped 1 point to 14 from 15 the month before, the group said in a statement. That was shy of expectations for 15, according to a Reuters poll of economists.

Readings below 50 mean more builders view market conditions as poor than favorable. The index has been stuck between 13 and 16 for six months in a row, and has not been above 50 since April 2006.

"Very little has changed in terms of housing market conditions so far this year," NAHB Chairman Bob Nielsen said in a statement. "Builders continue to confront the same challenges in accessing construction credit, obtaining accurate appraisal values for new homes, and competing against foreclosed properties that they have seen for some time."

The gauge of sales expectations in the next six months slipped to 17 from 19.

A glut of homes for sale, ongoing foreclosures and weak prices have hamstrung the sector, while buyers have mostly stayed on the sidelines.

(Reporting by Leah Schnurr, Editing by Chizu Nomiyama)

We're starting to run out of combinations in the riveting game of "Clue" being played by Europe. Once again, we hear the players saying "It was Greece, in the Parlor, with the Sovereign Debt," or was it the pipe wrench? Either way, there are long term and short term Greek concerns combined domestically with anticipation of the FOMC's probably "Operation Twist" announcement fueling a fresh risk-off trade this morning. In the short term, there's concern that investigators in the EU won't approve Greece's next loan payment when they conduct a conference call later today. But we've also heard that the Mid-October deadline for a decision to give Greece their sixth tranche of bailout funds is the real kicker. Whether it's more to do with "Clue" or "Operation," MBS don't care for such games and although green on the day, are being handily outperformed by benchmarks: - 10yr yields are down almost 9 bps to 1.97 - Fannie 4.0's are up 9 ticks in price to 104-11 - Fannie 3.5's are up 14 ticks to 101-17 Rate sheets should be improved versus Friday's latest, but we wouldn't rule out some conservative strategies due to the fact that the morning rally is headline driven and with FOMC still a few days away.