MBS MID-DAY: Stock-Lever-Inspired Weakness After Strong Opening Levels
By:
Matthew Graham
•
MBS Live: MBS Morning Market Summary
MBS and Treasuries both opened up at strong levels, the former at all-time highs, and the latter at the lowest yields since 1/31/12. It's also worth noting that those 1/31 yields were an outlying dip, and were as low as 10yr yields have been since early October 2011. We hit 1.794 today vs 1.792 in January. Today's ebbs and flows are clearly linked to the broad notion of "risk," particularly as it relates to Europe. Case in point, when a Greek political leader from the far right was out around 10:30am New York time saying that there would not be enough seats for the "anti-bailout" government that far left leader Tsipras set out to create today. At that same time, risk markets came roaring back, relatively speaking, with S&P futures up almost 15 points since then. 10yr yields are happy to follow with the 10yr Note Auction coming up at 1pm. MBS continue to be merely along for the ride--a bumpy one at that.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
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Morning Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts and updates issued via email and text alert to MBS Live subscribers this morning.
10:05AM :
ECON: Wholesale Inventories and Sales Rise Slightly
*Inventories +0.3 vs +0.6 consensus
* Sales +0.5 vs +0.7 consensus
* Petroleum Inventories down 5.9 pct, most since May 2010
The U.S. Census Bureau announced today that March 2012 sales of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations and trading-day differences but not for price changes, were $411.1 billion, up 0.5 percent (+/-0.7)* from the revised February level and were up 6.5 percent (+/-1.2%) from the March 2011 level. The February preliminary estimate was revised downward $0.4 billion or 0.1 percent. March sales of durable goods were down 0.6 percent (+/-1.1%)* from last month, but were up 7.8 percent (+/-1.2%) from a year ago. Sales of nondurable goods were up 1.5 percent (+/-0.7%) from February and were up 5.5 percent (+/-1.4%) from last March. Sales of farm product raw materials were up 4.3 percent from last month and sales of petroleum and petroleum products were up 2.7 percent.
Total inventories of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations but not for price changes, were $480.4 billion at the end of March, up 0.3 percent (+/-0.4%)* from the revised February level and were up 8.4 percent (+/- 1.2%) from the March 2011 level. The February preliminary estimate was virtually unchanged. March inventories of durable goods were up 1.0 percent (+/-0.4%) from last month and were up 10.8 percent (+/-1.6%) from a year ago. Inventories of lumber and other construction materials were up 2.1 percent from last month and inventories of machinery, equipment, and supplies were up 1.6 percent. Inventories of nondurable goods were down 0.6 percent (+/-0.5%) from February, but were up 5.1 percent (+/-1.4%) from last March. Inventories of petroleum and petroleum products were down 5.9 percent from last month and inventories of paper and paper products were down 2.0 percent. Inventories/Sales Ratio.
The March inventories/sales ratio for merchant wholesalers, except manufacturers’ sales branches and offices, based on seasonally adjusted data, was 1.17. The March 2011 ratio was 1.15.
* Sales +0.5 vs +0.7 consensus
* Petroleum Inventories down 5.9 pct, most since May 2010
The U.S. Census Bureau announced today that March 2012 sales of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations and trading-day differences but not for price changes, were $411.1 billion, up 0.5 percent (+/-0.7)* from the revised February level and were up 6.5 percent (+/-1.2%) from the March 2011 level. The February preliminary estimate was revised downward $0.4 billion or 0.1 percent. March sales of durable goods were down 0.6 percent (+/-1.1%)* from last month, but were up 7.8 percent (+/-1.2%) from a year ago. Sales of nondurable goods were up 1.5 percent (+/-0.7%) from February and were up 5.5 percent (+/-1.4%) from last March. Sales of farm product raw materials were up 4.3 percent from last month and sales of petroleum and petroleum products were up 2.7 percent.
Total inventories of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations but not for price changes, were $480.4 billion at the end of March, up 0.3 percent (+/-0.4%)* from the revised February level and were up 8.4 percent (+/- 1.2%) from the March 2011 level. The February preliminary estimate was virtually unchanged. March inventories of durable goods were up 1.0 percent (+/-0.4%) from last month and were up 10.8 percent (+/-1.6%) from a year ago. Inventories of lumber and other construction materials were up 2.1 percent from last month and inventories of machinery, equipment, and supplies were up 1.6 percent. Inventories of nondurable goods were down 0.6 percent (+/-0.5%) from February, but were up 5.1 percent (+/-1.4%) from last March. Inventories of petroleum and petroleum products were down 5.9 percent from last month and inventories of paper and paper products were down 2.0 percent. Inventories/Sales Ratio.
The March inventories/sales ratio for merchant wholesalers, except manufacturers’ sales branches and offices, based on seasonally adjusted data, was 1.17. The March 2011 ratio was 1.15.
9:34AM :
ALERT ISSUED:
Bond Markets Near 7-Month Highs on Euro-Drama
♫ Greece and Spain and Spain and Greece ♫... Word has it that this will be the next hit song debuting on Glee, and we just wanted you to know they got the idea bond markets, which have been singing that tune on many-a-morning over the past 7 months.
Today is no exception as the bailout needs for Spain's banking sector grow ever larger and Greek political drama continues to disturb more than it entertains.
There are no major surprises out of Greece though Tsipras (the guy who wants to proactively renege on EU/IMF bailout conditions) is meeting with the less-insane leaders of the other political parties in an attempt to set up a new coalition government. The fact that he's preconditioning the meeting on their agreement to join him in his quest to disavow previous austerity agreements (thus plunging the country into an inescapable vortex of doom and destruction, we're sure) has many onlookers doubting he'll make much progress.
There are really no major surprises out of Spain either. The fact that Spain's banking sector continues to get more and more dire attention is very much to-be-expected by many market participants. The latest developments include Spain increasing loan-loss-reserve requirements for its banks, leading to the expectation that Spain will need bailout funding, and soon.
All of the above pushed Greek and Spanish sovereign debt yields rapidly wider to European Benchmarks and helped fuel a bid for US Treasuries into the domestic session. 10yr yields came within a few small bps of the 1/31/12 low of 1.792% and are currently trading in the mid 1.80's. Fannie 3.5 MBS touched new all-time highs earlier this morning, but only by half a tick vs y'day.
Production MBS continue to be painful to watch as they're mercilessly pushed up and ground against the ceiling in the low 104's. Normally, such a ceiling would be like filter of some sort, allowing for a logical diffusion of bid-side demand to work it's way toward the next most aggressive coupon. But because 3.0's are no-mans-land, that ceiling in 3.5's is more like a cheese-grater. A little bit of the positivity makes it through with each new push, but most of it gets mutilated and falls back into the bowl.
Today is no exception as the bailout needs for Spain's banking sector grow ever larger and Greek political drama continues to disturb more than it entertains.
There are no major surprises out of Greece though Tsipras (the guy who wants to proactively renege on EU/IMF bailout conditions) is meeting with the less-insane leaders of the other political parties in an attempt to set up a new coalition government. The fact that he's preconditioning the meeting on their agreement to join him in his quest to disavow previous austerity agreements (thus plunging the country into an inescapable vortex of doom and destruction, we're sure) has many onlookers doubting he'll make much progress.
There are really no major surprises out of Spain either. The fact that Spain's banking sector continues to get more and more dire attention is very much to-be-expected by many market participants. The latest developments include Spain increasing loan-loss-reserve requirements for its banks, leading to the expectation that Spain will need bailout funding, and soon.
All of the above pushed Greek and Spanish sovereign debt yields rapidly wider to European Benchmarks and helped fuel a bid for US Treasuries into the domestic session. 10yr yields came within a few small bps of the 1/31/12 low of 1.792% and are currently trading in the mid 1.80's. Fannie 3.5 MBS touched new all-time highs earlier this morning, but only by half a tick vs y'day.
Production MBS continue to be painful to watch as they're mercilessly pushed up and ground against the ceiling in the low 104's. Normally, such a ceiling would be like filter of some sort, allowing for a logical diffusion of bid-side demand to work it's way toward the next most aggressive coupon. But because 3.0's are no-mans-land, that ceiling in 3.5's is more like a cheese-grater. A little bit of the positivity makes it through with each new push, but most of it gets mutilated and falls back into the bowl.
Live Chat Featured Comments
A recap of the featured comments from the MBS Live Dashboard's Live Chat feature, utilized by hundreds of industry professionals each day.
Adam Quinones : "no common sense in this world."
Jason Zimmer : "if you use w-2 you need pay stub. if you can use k-1 profit alone than you dont' need pay stub"
Aaron Buyside Meyer : "already tried it VB with P&L showing Gross receipts are on par w/ previous. VB he is going to do that but I need 2 paystubs, it shouldn't have need to go this far"
Victor Burek : "cant you just get your client to pay himself..then close the loan?"
Aaron Buyside Meyer : "I agree they said he needs a paystub as 100% owner of Scorp"
Gus Floropoulos : "ABM, ur UW is a moron"
Aaron Buyside Meyer : "I have a SE dentist who made $200+ a year last 2 years on a w-2 but hasn't paid himself a paystub yet this year. UW declined it 65% LTV rate & Term"
Adam Quinones : "people need jobs. but to get a job these days you have to be a productive individual capable of working with advanced technology. "
Aaron Buyside Meyer : "it feels like groundhogs days with talk of a massive refi program, Europe etc"
Matthew Graham : "pain is on the menu, the only question is how you want it prepared and served."
Adam Quinones : "not sure there is a better option than that BB..."
Andrew Horowitz : "right now there is no alternative, you pull the fed away from the trough and our rates go up, if you slow our economy, the slow down globally would be disasterous"
Adam Quinones : "aka you're preaching to the choir. I don't know what the alternative is either."
Brent Borcherding : "With inflation running at or near targets, enticing banks to turn reserves into money would TRULY increase the money supply and spark inflation"
Adam Quinones : "you sound like me two years ago AH."
Adam Quinones : "investments are being made in technology, not people. Labor force can't keep up with technology"
Andrew Horowitz : "the alternative is worse though AQ"
Adam Quinones : "banks just piling on the reserves, companies flush with cash."
Adam Quinones : "we're certainly not getting any money creation from operation twist. "
Brent Borcherding : "spark inflation?"
Adam Quinones : "at this point id rather see them invert the curve and force banks to turn reserves into money---too bad these capital requirements and Basel III are squashing that potential."
Victor Burek : "what do you think they should do..nothing. just maintain current portfolio?"
Adam Quinones : "but this is getting out of control."
Adam Quinones : "..and you know I used to be a HUGE Fed supporter."
Adam Quinones : "im not a fan of the Fed's strategy right now."
Adam Quinones : "same folks who already refinanced would just refinance again"
Adam Quinones : "would certainly ding up their portfolio! "
Aaron Buyside Meyer : "in all seriousness... what advantage would the FED "explicititly" buying into the 3.0's do for the economy in general? So rates maybe move .375-.5% that isn't creating a single job? Do they really think .5% lower in rate will spur the housing market now?"
Adam Quinones : "qe9?"
Aaron Buyside Meyer : "qe3?"
Adam Quinones : "*explicitly "
Adam Quinones : "yet until the Fed says they're gonna buy 'em"
Adam Quinones : "no where else to go for lock desks. no liquidity in 3.0s!"
Gus Floropoulos : "i saw pricing improve monday and tuesday, but it was marginal"
Victor Burek : "plaza's best rates were on friday, yesterday plaza was .25 worse than fridays pricing, but mbs higher by 5"
Matthew Graham : "yeah, sort of. That was the previous high, but we won't have a definitive breakout this time anyway, or at least it's highly unlikely considering the roll tomorrow."
Jason York : "whats the breakout point? 104-06?"
Gus Floropoulos : "mbs lagging"
B-C : "wow the 10yr was at 16 at one point? hjow is that for a "things could always be worse""
MMNJ : "i wonder what the 3.0 coupon was like in 1800.....just sayin'....."
John Rodgers : "I thought the 10 was first issued in the mid 20th century"
Matthew Graham : "Here's the other chart I mentioned: http://tinyurl.com/6nl4oj5"
MMNJ : "BTW, ate the MBA Secondary Conference we had a meeting with CITI.....all I can say is that I wish I recorded it and made it a Pay-Per-View special....."
MMNJ : "1.72 looks like the low at which it "finished" (9/22/11) -- but I think do i do remember it dipping into the 1.6's intraday"
Matthew Graham : "I guess there's some chart floating around that goes back to the 1800's that claims it was lower at some point in ancient history, but a) I don't remember where it was and b) I wouldn't really care. No one should give you a hard time for thinking of 1.674 as all time lows. "
Matthew Graham : "for this era, yeah, 1.674"
Jeff Anderson : "What's the all-time low? Was it 1.67?"
Patrick Waldron : "You make an excellent point AH. "
Andrew Horowitz : "really? sigh because the ten year will be 1.82? "
Patrick Waldron : "By the time we open we'll be at 1.8245 again. SIGH."
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