MBS MID-DAY: 2/10/2012

By: Matthew Graham •
MBS Live: MBS MID-DAY
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FNMA 3.5
103-17 : +0-07
FNMA 4.0
105-10 : +0-04
FNMA 4.5
106-19 : +0-04
FNMA 5.0
107-29 : +0-03
GNMA 3.5
105-02 : +0-08
GNMA 4.0
107-23 : +0-07
GNMA 4.5
109-04 : +0-06
GNMA 5.0
110-28 : +0-06
FHLMC 3.5
103-08 : +0-08
FHLMC 4.0
104-30 : +0-03
FHLMC 4.5
106-03 : +0-03
FHLMC 5.0
107-19 : +0-01
Pricing as of 11:03 AM EST
Morning Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBS Live Dashboard.
10:35AM  :  ALERT: Bond Markets Doing Their Best To Hold Overnight Gains
Things have been fairly calm so far this morning, especially considering the raft of overnight and early morning headlines indicating that one of Greece's political party leaders will not vote to approve the bailout package. 10yr yields opened about 6bps lower and are currently at those same levels after having explored territory just over 1bp in either direction (aka: pretty narrow range).

Yesterday's roll in Fannie and Freddie 30yr MBS Coupons have the appearance that prices dropped an extra 8/32nds give or take. But this is because February coupons are charted on 2/10 while March coupons are charted today--in other words, they're the new "front month." March coupons are essentially right where they were when they came in this morning, just like Treasury yields.

The effects of the Consumer Sentiment data were mostly seem in stock markets, which weakened frolling the 9:55am release. Bond markets have been trending in a firmly sideways fashion despite this, with 10yr yields perhaps slanted a bit bearishly, while MBS are left to try to hold a price floor around 103-12. So far, so good in that regard as prices are currently 103-14 in Fannie 3.5's, with volume dying down. We'll get a Bernanke speech at 12:30, which may or may not be too late on this Friday to stir up much of a response. Beyond that, we're watching today's highs in 10yr yields around 1.996. If they were to break much higher than that, it could coincide with MBS having a tough time holding on to their lows of the day.
10:04AM  :  ECON: Survey of Economists Shows Better Expected Job Growth
The Philadelphia Federal Reserve released a first-quarter survey of 45 forecasters showing upward revisions to expected payroll growth. This provides some counterpoint to bond-market benefits felt from the weaker-than-expected Consumer Sentiment data out five minutes earlier.
  • RTRS - QUARTERLY FORECASTERS SURVEY - US Q1 GDP GROWTH SEEN AT +2.2 PCT VS PREVIOUS FORECAST +2.4 PCT
  • RTRS - FORECASTERS SURVEY - US Q2 GDP GROWTH SEEN AT +2.3 PCT VS PREVIOUS FORECAST +2.4 PCT
  • RTRS - SURVEY - US Q1 PAYROLLS SEEN GROWING AVERAGE 160,100/MONTH VS PVS FORECAST 121,000/MONTH
  • RTRS - SURVEY - US Q2 PAYROLLS SEEN GROWING AVERAGE 141,900/MONTH VS PVS FORECAST 126,300/MONTH
  • RTRS - SURVEY - US Q1 UNEMPLOYMENT RATE SEEN AT 8.4 PCT VS PREVIOUS FORECAST 8.9 PCT
  • RTRS - SURVEY - US Q2 UNEMPLOYMENT RATE SEEN AT 8.3 PCT VS PREVIOUS FORECAST 8.9 PCT
  • RTRS - SURVEY - US Q1 CORE PCE INFLATION SEEN AT +1.6 PCT VS PREVIOUS FORECAST +1.6 PCT
  • RTRS - SURVEY - US Q1 CORE CPI INFLATION SEEN AT +1.9 PCT VS PREVIOUS FORECAST +1.8 PCT
9:58AM  :  ECON: Consumer Sentiment Slightly Lower Than Expected
  • RTRS - US CONSUMER SENTIMENT PRELIMINARY FEB 72.5 (CONSENSUS 74.5) VS FINAL JAN 75.0
  • RTRS - CURRENT CONDITIONS INDEX PRELIMINARY FEB 79.6 (CONSENSUS 84.5) VS FINAL JAN 84.2
  • RTRS - CONSUMER EXPECTATIONS INDEX PRELIMINARY FEB 68.0 (CONSENSUS 69.5) VS FINAL JAN 69.1
  • RTRS - 12-MONTH ECONOMIC OUTLOOK INDEX PRELIMINARY FEB 82 VS FINAL JAN 82
  • RTRS - 1-YEAR INFLATION OUTLOOK PRELIMINARY FEB 3.2 PCT VS FINAL JAN 3.3 PCT
  • RTRS - 5-YEAR INFLATION OUTLOOK PRELIMINARY FEB 2.9 PCT VS FINAL JAN 2.7 PCT


Bond markets weakened slightly ahead of the report but have since bounced back to previous levels, or otherwise seem to be in the process of doing so. Stocks are down about 3 points in the S&P and volume is some of the best of the day.
9:07AM  :  ECON: Trade Deficit In Line With Expectations. No Market Reaction
  • RTRS- US DEC TRADE DEFICIT $48.80 BLN (CONSENSUS $48.00 BLN) VS NOV DEFICIT $47.06 BLN (PREV $47.75 BLN)
  • RTRS- US DEC EXPORTS +0.7 PCT VS NOV -1.0 PCT, IMPORTS +1.3 PCT VS NOV +1.0 PCT
  • RTRS- US DEC GOODS DEFICIT $64.30 BLN, SERVICES SURPLUS $15.50 BLN
  • RTRS- US DEC EXPORTS $178.76 BLN VS NOV $177.53 BLN, IMPORTS $227.56 BLN VS NOV $224.58 BLN
  • RTRS- U.S. DEC CAPITAL GOODS IMPORTS RECORD HIGH $44.67 BLN VS NOV IMPORTS $43.64 BLN
  • RTRS- U.S.-CHINA DEC TRADE DEFICIT $23.14 BLN VS NOV DEFICIT $26.87 BLN; US-GERMANY DEC DEFICIT RECORD HIGH $4.83 BLN
  • RTRS- US-OPEC DEC TRADE DEFICIT $9.10 BLN VS NOV DEFICIT $9.11 BLN
  • RTRS- US DEC OIL IMPORT PRICE $104.13/BBL VS NOV $102.50/BBL, +30.5 PCT FROM DEC'10 $79.79/BBL
  • RTRS- US 2011 TRADE DEFICIT $558.02 BLN, HIGHEST SINCE 2008, VS 2010 DEFICIT $500.03 BLN
  • RTRS- US 2011 TOTAL IMPORTS $2.66 TRLN, EXPORTS $2.10 TRLN AT RECORD HIGHS
  • RTRS- U.S.-CHINA 2011 TRADE DEFICIT AT RECORD HIGH $295.5 BLN; EXPORTS, IMPORTS AT RECORD HIGHS
Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBS Live Dashboard.
Matt Hodges  :  "appears WF gave back what they took away in RP yesterday PM"
Matthew Graham  :  "RTRS- THOMSON REUTERS/U. OF MICH CURRENT CONDITIONS INDEX PRELIMINARY FEB 79.6 (CONSENSUS 84.5) VS FINAL JAN 84.2 "
Matthew Graham  :  "RTRS - THOMSON REUTERS/U. OF MICH US CONSUMER SENTIMENT PRELIMINARY FEB 72.5 (CONSENSUS 74.5) VS FINAL JAN 75.0 "
Matthew Graham  :  "more explanation: http://www.mortgagenewsdaily.com/mortgage_rates/blog/180770.aspx"
Andrew Horowitz  :  "the last trade that you saw yesterday was the last trade of the 3.5 coupon for delivery into February, the current March coupon was trading and has been trading for several months, we roll to the next coupon for delivery which usually has a 10 tick spread "
Michael Lewin  :  "If yesterday the 3.5 ended at 103.23, and today it is currently at 103.14, how is it up 4 ticks?"
Steven Stone  :  "look at the chart of higher coupons...very evident there...looks like almost no roll at all"
Steven Stone  :  "as more people think that, the roll tightens"
Steven Stone  :  "if you dont think rates are going up...you can buy a later delivery...you get a bit of a discount for that"
Steven Stone  :  "tighter rolls mean there is less interrest rate risk. "
Matt Hodges  :  "is it good, bad or indifferent to us?"
Matthew Graham  :  "103-22 to 103-14"
Matthew Graham  :  "ended up only being 8 ticks"
Scott Valins  :  "did we roll yesterday?"
Jeff Anderson  :  "I'm pretty confident their 18th meeting on this will be the charm."
Matthew Graham  :  "I'm tellin' ya! It's no coincidence that Greece is the birthplace of theater. These guys know their drama and ain't shy about delivering it hand over fist"
Matthew Graham  :  "RTRS - GREEK FAR-RIGHT PARTY LEADER SAYS ELECTIONS WOULD NOT PROVIDE A SOLUTION NOW, WOULD NEED MORE TIME "
Matthew Graham  :  "RTRS - I explained to the other political leaders that I cannot vote for this loan agreement," George Karatzaferis, head of the LAOS party, told a news conference. "
Matthew Graham  :  "RTRS- GREEK FAR-RIGHT PARTY LEADER SAYS ASKS FOR RESHUFFLE OF PAPADEMOS TECHNOCRAT GOVERNMENT "
Matthew Graham  :  "RTRS- RPT- GREEK FAR-RIGHT PARTY LEADER SAYS CANNOT BACK BAILOUT AGREEMENT "
Matthew Graham  :  "additionally, there were a few more headlines just after 7am eastern, and a huge volume spike for pre-market hours (not to mention 10's hit 8am at a ridiculously high futures contracts volume of 340k):"
Matthew Graham  :  "here you go Jeff: http://www.mortgagenewsdaily.com/mortgage_rates/blog/247045.aspx"
Matthew Graham  :  "" It all just looks like a broad-based unwinding of whatever optimism was created by Greece's negotiations. Are we doomed to relive all of this next week? Anyone seen Punxsutawney Phil? ""
Matthew Graham  :  "just spell checking what I wrote last night Jeff, shouldn't be long"
Jeff Anderson  :  "GM, all. Where's the cliffe notes for what happended overnight?"