MBS MID-DAY: 11/29/2011

(Reuters) - U.S. consumer confidence bounced back from a 2-1/2 year low in November as apprehension about job and income prospects eased, according to a private sector report released on Tuesday.

The Conference Board, an industry group, said its index of consumer attitudes jumped to 56.0 from a upwardly revised 40.9 the month before.

It was the highest level since July and handily topped economists' forecasts for 44.0. October was originally reported as 39.8.

"Consumers' assessment of current conditions finally improved, after six months of steady declines," Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement.

"Consumers appear to be entering the holiday season in better spirits, though overall readings remain historically weak." The expectations index also rose to its highest level since July at 67.8 from 50.0, while the present situation index gained to its highest level since May at 38.3 from 27.1.

Consumers' labor market assessment improved. The number of respondents that said they found "jobs hard to get" eased to 42.1 percent from 46.9 percent, while the "jobs plentiful" index rose to 5.8 percent from 3.6 percent.

Consumers also felt better about price increases with expectations for inflation in the coming 12 months falling to 5.5 percent from 5.8 percent. (Reporting by Leah Schnurr, Editing by Chizu Nomiyama)

CoreLogic today released negative equity data showing that 10.7 million, or 22.1 percent, of all residential properties with a mortgage were in negative equity at the end of the third quarter of 2011. This is down slightly from 10.9 million properties, or 22.5 percent, in the second quarter. An additional 2.4 million borrowers had less than 5 percent equity, referred to as near-negative equity, in the third quarter. Together, negative equity and near-negative equity mortgages accounted for 27.1 percent of all residential properties with a mortgage nationwide in the third quarter, down from 27.5 in the previous quarter.

NEW YORK, Nov 29 (Reuters) - U.S. single-family home prices declined in September, highlighting the fragility of a market that is struggling to get back on its feet, a closely watched survey showed on Tuesday.

The S&P/Case Shiller composite index of 20 metropolitan areas fell 0.6 percent from August on a seasonally adjusted basis. A Reuters poll of economists had forecast no change.

Prices in August were also revised to show a decline of 0.3 percent after originally being reported as unchanged.

The index has leveled off in recent months and analysts are hoping the market is at least stabilizing.

"Over the last year home prices in most cities drifted lower," David Blitzer, chairman of the index committee at Standard & Poor's, said in a statement.

"The plunging collapse of prices seen in 2007-2009 seems to be behind us. Any chance for a sustained recovery will probably need a stronger economy."

For the third quarter, prices were down 1.2 percent from the previous quarter on a seasonally adjusted basis and were down 3.9 percent from the third quarter a year ago.

Compared to a year ago, price declines in the 20 cities continued to improve in September and were down 3.6 percent after a year over year decline of 3.8 percent the month before. (Reporting by Leah Schnurr, Editing by Chizu Nomiyama)

(Reuters) - The European Central Bank will cut interest rates next week and throw more funding lifelines to stressed banks toiling against the euro zone's debt crisis, according to a firm majority of economists polled by Reuters.

While Europe's leaders spar over ways to tackle the crisis, the poll suggested that under its new President Mario Draghi the ECB will act more decisively, perhaps through unconventional means.

The survey of 73 analysts showed a 40 percent chance the ECB will follow the U.S. and British central banks in the next six months and start purchasing government bonds from struggling euro zone economies using freshly created money -- or quantitative easing (QE).

Draghi has already surprised analysts and financial markets in November by cutting interest rates from 1.5 percent to 1.25 percent, while warning of an imminent recession.

The poll showed a 60 percent chance he will cut rates again in December, pushing rates back to a record low of 1.0 percent, higher than the 50 percent probability from a poll on Nov. 3.

A firm majority of analysts -- 39 out of 52 -- said the ECB would announce new long-term money market tenders for banks next week, with most of them saying it would offer maturities of one or two years. A poll of money market traders on Monday came to the same conclusion.

Many analysts believe the best way of resolving the euro zone crisis now seems to be persuading the ECB and Germany to abandon their opposition to the bank embarking on QE. Poll respondents held diverse views on whether the ECB would launch such easing in the coming months, with forecasts ranging from zero to a 90 percent probability of doing so, producing a median 40 percent chance. That compared with a 48 percent in a poll of economists and bond strategists conducted two weeks ago.

In the context of recent market movements and recent availability of juicy EU headlines, last night was pretty ho-hum. US Treasuries were content to follow German Bunds for the most part although the latter remain more prone to bigger swings. After hitting 2.015, 10's fought back a bit from 5am to 8am to begin the day at 1.99. MBS are just slightly weaker to start the day, down 2 ticks at 101-25. If that holds up through rate sheet time, we should see some improvements.

Between economic data and Fed-speak, there's a lot on tap today:

900 AM - Case Shiller Home Prices - On a seasonally-adjusted basis, there's no change expected to the month-over-month 20 city index while the not-seasonally-adjusted numbers are expected to have slowed to 0.1% from 0.2% last month. The year-over-year rate of decline is also expected to have eased to -3.0% vs -3.8%

1000 AM - Consumer Confidence - previous: 39.8 / forecast: 44.0

1000 AM - FHFA Monthly Home Prices

Fed Speakers:

1130am - Yellen
1215am - Raskin
1230am - Lockhart
0430pm - Williams
700-800pm - Kocherlakota

Despite the glut of data and Fed-speak, we'd need to see a big miss or beat of expectations (or big surprise from a Fed speaker) in order for our domestic economic situation to wrest the reigns of market movement from European events. Expectations for today's EU summit have quickly lost gravity in favor of the December 9th meeting, so any EU-inspired swings would more likely have to come from "unscheduled events" this morning. Oh Joy.