MBS MID-DAY: 3/7/2012

By: Matthew Graham
MBS Live: MBS MID-DAY
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FNMA 3.5
103-18 : -0-04
FNMA 4.0
105-10 : -0-04
FNMA 4.5
106-15 : -0-05
FNMA 5.0
107-28 : -0-03
GNMA 3.5
105-04 : -0-02
GNMA 4.0
107-29 : -0-01
GNMA 4.5
108-30 : -0-01
GNMA 5.0
110-10 : +0-02
FHLMC 3.5
103-12 : -0-02
FHLMC 4.0
104-32 : -0-04
FHLMC 4.5
106-04 : -0-05
FHLMC 5.0
107-18 : -0-02
Pricing as of 10:59 AM EST
Morning Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBS Live Dashboard.
9:43AM  :  MBA: Commercial/Multifamily Mortgage Delinquencies Down
Commercial and multifamily mortgage delinquency rates declined during the fourth quarter of 2011, and an analysis of data from the Federal Deposit Insurance Corporation (FDIC) shows that commercial and multifamily mortgages have fared better through the credit crunch and recession than any other major type of loan held by banks and thrifts, according to two reports released today by the Mortgage Bankers Association (MBA).

During the fourth quarter, the 60+ day delinquency rate for loans held in life company portfolios fell 0.02 percentage points to 0.17 percent. The 60+ day delinquency rate for multifamily loans held or insured by Freddie Mac fell 0.11 percentage points to 0.22 percent. The 90+ day delinquency rate for loans held by FDIC-insured banks and thrifts fell 0.20 percent to 3.55 percent. The 30+ day delinquency rate for loans held in commercial mortgage-backed securities (CMBS) fell 0.36 percentage points to 8.56 percent. The 60+ day delinquency rate for multifamily loans held or insured by Fannie Mae increased 0.02 percentage points to 0.59 percent. These and other figures come from MBA's Commercial Real Estate/Multifamily Finance Mortgage Delinquency Rates for Major Investor Groups report.
9:09AM  :  ALERT: Bond Markets Open Flat, Move Slightly Weaker Following Econ
Stocks and Treasury yields trudged noncommittally higher overnight with 10yr notes trading into the 1.97's before falling back to unchanged by 8am on news that Greece only had 39% of private bond-holders committed to the private-sector-bond swap ahead of Thursday's deadline. MBS opened dead even with yesterday's latest levels.

An ADP Private Payrolls report that just barely beat expectations was apparently enough for Treasury yields to back up to overnight highs and for MBS to fall briefly to yesterday's lows before settling in around 5 ticks weaker at the moment at 103-16.

Key pivot points for MBS lie at 103-23 and 103-10, but 103-18 has also been a reasonably well-traveled price level, seeing it's fair share of ceiling/floor bounces.

The Productivity and Costs report is also assumed to play some small role in this morning's bond market weakness with a slightly better than expected read on productivity and a significantly higher-than-expected "unit labor cost" component, +2.8% vs a +1.2% consensus.

What we're essentially witnessing is minor bond-bearish bounce that undoes a moderate amount of yesterday's gains, but not a runaway reversal in momentum. To be clear, momentum is decidedly sideways, holding out for clearer indications from the Greek debt swap and of course, Friday's NFP.

So far this morning, 10yr yields have managed to hang on to a ceiling bounce just slightly lower than yesterday's first example of a similar ceiling bounce. Today could be on the volatile side, however, with little else on the calendar left to inform directionality and contending with technical gravity pulling 10yr yields back toward their linear regression line to the last NFP report, perfectly flat at 1.983.

Keep an eye out for a meaningful break of that level as well as the previously mentioned pivots for MBS as milestones of deterioration in the case of 103-10 or improvement in the case of 103-23.
8:39AM  :  ECON: Productivity Slightly Better, Huge Jump in Costs
RTRS - U.S. Q4 NON-FARM PRODUCTIVITY REVISED TO +0.9 PCT (CONSENSUS +0.8 PCT), PREV +0.7 PCT

RTRS - U.S. Q4 NON-FARM UNIT LABOR COSTS REVISED TO +2.8 PCT (CONSENSUS +1.2 PCT), PREV +1.2 PCT

Nonfarm business sector labor productivity increased at a 0.9 percent annual rate during the fourth quarter of 2011, the U.S. Bureau of Labor Statistics reported today. The gain in productivity reflects increases of 3.7 percent in output and 2.7 percent in hours worked. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the fourth quarter of 2010 to the fourth quarter of 2011, productivity grew 0.3 percent, as output rose 2.3 percent and hours rose 1.9 percent. Annual average productivity increased 0.4 percent from 2010 to 2011.

Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked of all persons, including employees, proprietors, and unpaid family workers. The measures released today were based on more recent source data than were available for the preliminary report.

Unit labor costs in nonfarm businesses increased 2.8 percent in the fourth quarter of 2011, as productivity grew at a slower rate (+0.9 percent) than hourly compensation (+3.7 percent). Unit labor costs rose 3.1 percent over the last four quarters. Annual average unit labor costs increased 2.0 percent from 2010 to 2011.

BLS defines unit labor costs as the ratio of hourly compensation to labor productivity; increases in hourly compensation tend to increase unit labor costs and increases in output per hour tend to reduce them.
8:35AM  :  ECON: ADP Private Payrolls Very Close to Consensus
Employment in the U.S. nonfarm private business sector increased by 216,000 from January to February on a seasonally adjusted basis. The estimated advance in employment from December to January was revised slightly upwards to 173,000 from the initially reported 170,000. Employment in the private, service-providing sector rose 170,000 in February, and employment in the private, goods-producing sector increased 46,000 in February. Manufacturing employment increased 21,000.

According to today’s ADP National Employment Report, employment in the nonfarm private business sector rose 216,000 from January to February on a seasonally adjusted basis. Employment in the private, service-providing sector increased 170,000 in February, after rising a revised 149,000 in January. Employment in the private, goods-producing sector rose 46,000 in February. Manufacturing employment increased 21,000, while construction employment advanced 16,000 and the financial services sector added 14,000 jobs during that period.

This month’s employment gains in The ADP National Employment Report continue to be solid, with job growth averaging just over 200,000 for the past five months, said Carlos Rodriguez, President and CEO of ADP. ―Also, for February, virtually every sector of the economy added jobs – something I hope will continue for the rest of 2012.

―Employment grew in all the major sectors of the economy tracked in The Report, and across payrolls of all sizes. Employment on medium payrolls—those with 50 to 499 workers—rose 88,000 in February. Employment on large payrolls—those with 500 or more workers—increased 20,000 during that same period,‖ Prakken noted.
8:12AM  :  Mortgage Applications Down 1.2%
Mortgage applications decreased 1.2 percent from one week earlier, according to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending March 2, 2012.

The Market Composite Index, a measure of mortgage loan application volume, decreased 1.2 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 10.2 percent compared with the previous week. The Refinance Index decreased 2.0 percent from the previous week. The seasonally adjusted Purchase Index increased 2.1 percent from one week earlier. The unadjusted Purchase Index increased 14.7 percent compared with the previous week and was 7.8 percent lower than the same week one year ago. Last week's results included an adjustment for the Presidents Day holiday.
Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "RTRS - WELLS FARGO CFO SAYS MORTGAGE BUSINESS GAINING MARKET SHARE BECAUSE OF FEWER 'IRRATIONAL COMPETITORS'"
Michael Kelleher  :  "rick santelli this morning "we have the biggest economy in the world, I should hope we can produce 200,000 new jobs" - I don't know the exact words, but i got a nice little shoulder chuckle"
DK  :  "i believe your capped at 5k JR"
John Rodgers  :  "Good morning, I donn't really do any of the relief loans so I have a question. I have a borrower with a Freddie owned loan that qualifies for open access. I've contacted their lender and I can do the loan. Can I roll any of the costs into the loan? "
Matthew Graham  :  "RTRS- GREEK FINANCE MINISTRY OFFICIAL SAYS OPTIMISTIC THAT PARTICIPATION IN DEBT SWAP WILL EXCEED 75 PCT LEVEL "BY FAR" "
Ira Selwin  :  "yep"
Scott Valins  :  "through FHA connection?"
Ira Selwin  :  "Just run a case query on your old case number, and it will reflect the date."
Ira Selwin  :  "case query"
Scott Valins  :  "gm all...can someshare what date to look at when determining if someone meets the 6/1/2009 FHA streamline cutoff?"
Matthew Graham  :  "RTRS- U.S. Q4 NON-FARM UNIT LABOR COSTS REVISED TO +2.8 PCT (CONSENSUS +1.2 PCT), PREV +1.2 PCT"
Matthew Graham  :  "RTRS- U.S. Q4 NON-FARM PRODUCTIVITY REVISED TO +0.9 PCT (CONSENSUS +0.8 PCT), PREV +0.7 PCT "
Steven Fishman  :  "No. Does your LOS allow you to select the type of loan or version of the act 203k"
Jason Zimmer  :  "so LP won't give you that error?"
Steven Fishman  :  "I use LP I have similar issue with DO"
Jason Zimmer  :  "Fish...how do you run a 203k through DO? when i run with the loan amount higher than purchase price it says there isn't enough down payment and gives me an error"
Matthew Graham  :  "folgers > ADP this AM"
Justin Bayle  :  "Yawn"
Matthew Graham  :  "also uneventful!"
Matthew Graham  :  "RTRS - US ADP JANUARY PAYROLL CHANGE REVISED TO INCREASE OF 173,000 FROM 170,000"
Matthew Graham  :  "uneventful!"
Matthew Graham  :  "RTRS - REUTERS CONSENSUS FORECAST FOR ADP PAYROLL CHANGE FOR FEB WAS FOR INCREASE OF 208,000 JOBS "
Matthew Graham  :  "RTRS- ADP NATIONAL EMPLOYMENT REPORT SHOWS U.S. EMPLOYMENT INCREASED BY 216,000 PRIVATE SECTOR JOBS IN FEBRUARY "
B-C  :  "right i was thinking 2 weeks "
Ira Selwin  :  "if youre lucky"
Ira Selwin  :  "Minimum I'd say 8-10 days "
Ira Selwin  :  "of course."
B-C  :  "can also take less"
Ira Selwin  :  "so takes them 2 days to get the package out. FHA stips it for something"
Ira Selwin  :  "If the company doesnt self-insure, they send to FHA to insure"
Ira Selwin  :  "Loan cannot be insured until 7 business days after that"
B-C  :  "agreed"
Ira Selwin  :  "MIP paid after 4 days"
Ira Selwin  :  "Im saying it can happen"
B-C  :  "yes it is, you are saying you cant get endorsement in less than 1 month?"
Ira Selwin  :  "MIP is paid typically 2-4 days after a loan funds"
Ira Selwin  :  "No its not BC"
Victor Burek  :  "so if cut off is 6/1..probably only loans that closed in april"
B-C  :  "thats a stretch"
Ira Selwin  :  "it could take up to a month to get a case # endorsed"
Ira Selwin  :  "VB - it depends on the company"