Historical Chart of Existing Sales. Current Charts of MBS and Treasuries

Versus a forecast of 4.80 mln unit annual rate, today's Existing Home Sales figure of 4.97 mln seems like a good piece of better-than-expected data.  But in truth, the metric is fighting for survival and stability as opposed to forging newer, more positive ground.  As seen in the longer term chart below, the first major slide in Existing Sales after the peak of the bubble brought the annual rate very near current levels--say, "about 5 mln."  After two spikes up for FTHB credits and a big spike down we see that the real extent of the slide would have been closer to a 4 mln unit annual rate.  After bottoming out in early 2010, we have 1 major high and low lying on separate trendlines.  In other words, we appear to be honing in on something around the 5 mln level.  The optimistic view for the housing market is that this level will be ready to serve as a point of more stable growth (which has generally adhered to the pace set by the yellow lines.  Best case scenario, you're seeing the visual psychology of the housing market on the chart below as real estate broke out of the "norm," experienced it's bubble, and is now attempting to get back in line with a sustainable trend.

Here's a quick look at MBS and Treasuries, prefaced with the following alert from MBS Live:

MBS Gaining Now. Treasuries Relatively Sideways. No Reprices Yet 10:55AM

MBS are currently making up for some of the ground they lost earlier this morning versus Treasury benchmarks. Thin Monday morning conditions combined with higher-than-normal levels of origination resulted in MBS significantly underperforming out of the gate. 

Interestingly, MBS have been mirroring movements in Stock prices to a greater degree than Treasuries, and several investor classes have notably come out of hiding into the stock market weakness with the Fed being the notable absentee. Money managers, REITs and other "Real Money" accounts as well as "Fast Money" accounts such as Hedge Funds all jumped on the bid-side bandwagon and Fannie 3.5's now find themselves up 7 ticks on the day at 101-28 while 10yr yields continue to struggle to break through a 1.95 yield level (currently 1.9533). 

Whether or not this is sufficient for positive reprices is somewhat questionable as the gains are still occurring within a fairly tight range, and many lenders will not have released rates early enough or weakly enough to justify it. We'd need the gains to hold for a longer amount of time or for further gains to be seen.

10yr yields tested the 1.95 level earlier but rose back above shortly after this chart was saved.  They continue to struggle with that resistance which MBS continue to operate in the trend channel seen above.

In the bigger picture, 1.95 is not such a big deal for Treasuries even though it might seem to be (and IS!) this morning.  The long term chart below is from a blog post last week that discussed the 3 sets of lines as the prevailing trends in 10 yr yields over the past few months with the grey lines being the sideways trend.  The lower grey line stands at 1.9337.