MBS MID-DAY: Data Brings Volume Back To Sleepy Markets. Rude Awakenings Ensue
By:
Matthew Graham
•
MBS Live: MBS Morning Market Summary
Mondays and Fridays continued their recent tradition of appallingly low volume (8/6, 8/10, 8/13). Volume was so low, in fact, that you could reasonably question the significance of any price fluctuations, instead waiting for confirmation or rejection whenever higher volume returned. It returned today. The initial, less significant culprit was the deluge of European data in the overnight session, but not only was that volume completely insignificant compared to the domestic session, it also didn't carry prices much lower or yields much higher. Once groggy domestic eyes hit the screens, the selling began. At first, there was only a moderate uptick in volume, but it was enough to bring 10yr yields up 2bps or so in the 1.5 hours leading up to 8:30am data. It was then that volume truly surged--biggest hour since NFP on 8/3--and exclusively negative for bond markets. The saving grace--if there is any--is that we haven't broken any higher in yield than last week's highs, though at 1.72+ now, we're quite close.
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.
10:03AM :
ECON: Business Inventories Rise Less Than Expected, Sales Weaker
* June inventories +0.1 pvt vs +0.2 pct consensus
* Sales -1.1 pct, largest drop since March 2009
* Inv/Sales Ratio 1.29 months, largest since Feb 2010
The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers’ shipments for June, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,229.7 billion, down 1.1 percent (±0.2%) from May 2012 and up 3.0 percent (±0.4%) from June 2011.
Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,580.3 billion, up 0.1 percent (±0.1%)* from May 2012 and up 5.0 percent (±0.3%) from June 2011.
The total business inventories/sales ratio based on seasonally adjusted data at the end of June was 1.29. The June 2011 ratio was 1.26.
* Sales -1.1 pct, largest drop since March 2009
* Inv/Sales Ratio 1.29 months, largest since Feb 2010
The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers’ shipments for June, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,229.7 billion, down 1.1 percent (±0.2%) from May 2012 and up 3.0 percent (±0.4%) from June 2011.
Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,580.3 billion, up 0.1 percent (±0.1%)* from May 2012 and up 5.0 percent (±0.3%) from June 2011.
The total business inventories/sales ratio based on seasonally adjusted data at the end of June was 1.29. The June 2011 ratio was 1.26.
9:04AM :
ALERT ISSUED:
Volume Surges And Prices Fall Following Stronger Retail Sales
The pressure was already on to some extent after a hectic European session, fraught with all manner of data. Despite a German investor sentiment falling, British inflation rising, Spanish banks borrowing, and overall Euro zone GDP falling, the data was perhaps not negative enough--especially when balanced with slightly better-than-expected German and French GDP--to bring bond yields down much heading into this morning's important Retail Sales numbers in the US.
This is indeed where we've seen our most dramatic surge of volume of the last week and a half. The better-than-expected Retail Sales print was slightly outside the realm of an "incidental beat" and thus gives pause to the notion that an ongoing economic contraction will inevitably force the Fed's QE3 hands.
MBS and Treasuries both made steep moves into weaker territory following the report. Though each bounced back in a hopeful direction briefly, MBS are now down again to 102-28 in Fannie 3.0s (8 ticks on the day) and T10 yr yields are just slightly higher than their initial sell-off bounce, good for a 4.6 bps rise since 5pm at 1.7120.
10's made it into the 1.73's last week before finally bouncing lower so staying under than recent ceiling is the only technical saving grace we have left for this morning's sell-off. If we break into new highs, however, the technical implications could be quite negative. Stay tuned.
This is indeed where we've seen our most dramatic surge of volume of the last week and a half. The better-than-expected Retail Sales print was slightly outside the realm of an "incidental beat" and thus gives pause to the notion that an ongoing economic contraction will inevitably force the Fed's QE3 hands.
MBS and Treasuries both made steep moves into weaker territory following the report. Though each bounced back in a hopeful direction briefly, MBS are now down again to 102-28 in Fannie 3.0s (8 ticks on the day) and T10 yr yields are just slightly higher than their initial sell-off bounce, good for a 4.6 bps rise since 5pm at 1.7120.
10's made it into the 1.73's last week before finally bouncing lower so staying under than recent ceiling is the only technical saving grace we have left for this morning's sell-off. If we break into new highs, however, the technical implications could be quite negative. Stay tuned.
8:51AM :
ECON: Producer Prices Higher Than Expected In July
* Headline +0.3 vs +0.2 consensus
* Core PPI +0.4 vs +0.2 consensus
* Year over year +0.5, smallest since Oct 2009
* Year over year CORE +2.5 vs +2.3 consensus
* BLS notes 40%+ of rise due to increase in light truck prices
The Producer Price Index for finished goods rose 0.3 percent in July, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This advance followed a 0.1-percent increase in June and a 1.0-percent decline in May. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved down 0.9 percent in July, and the crude goods index advanced 1.8 percent. On an unadjusted basis, prices for finished goods rose 0.5 percent for the 12 months ended July 2012, continuing the trend of slowing year-over-year increases following a 7.0-percent rise for the 12 months ended September 2011.
* Core PPI +0.4 vs +0.2 consensus
* Year over year +0.5, smallest since Oct 2009
* Year over year CORE +2.5 vs +2.3 consensus
* BLS notes 40%+ of rise due to increase in light truck prices
The Producer Price Index for finished goods rose 0.3 percent in July, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This advance followed a 0.1-percent increase in June and a 1.0-percent decline in May. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved down 0.9 percent in July, and the crude goods index advanced 1.8 percent. On an unadjusted basis, prices for finished goods rose 0.5 percent for the 12 months ended July 2012, continuing the trend of slowing year-over-year increases following a 7.0-percent rise for the 12 months ended September 2011.
8:39AM :
ECON: Retail Sales Stronger Than Expected Though June Revised Lower
* Retail Sales +0.8 vs +0.3 consensus
* Gasoline Sales +0.5 vs -3.4 previously
* Excluding Autos +0.8 vs +0.4 Consensus, largest in 6 months
The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for July, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $403.9 billion, an increase of 0.8 percent (±0.5%) from the previous month and 4.1 percent (±0.7%) above July 2011. Total sales for the May through July 2012 period were up 4.3 percent (±0.5%) from the same period a year ago. The May to June 2012 percent change was revised from -0.5 percent (±0.5%)* to -0.7% (±0.2%).
Retail trade sales were up 0.8 percent (±0.5%) from June 2012 and 3.7 percent (±0.7%) above last year. Nonstore retailers sales were up 11.8 percent (±3.1%) from July 2011 and sporting goods, hobby, book and music stores were up 10.6 percent (±4.3%) from last year.
* Gasoline Sales +0.5 vs -3.4 previously
* Excluding Autos +0.8 vs +0.4 Consensus, largest in 6 months
The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for July, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $403.9 billion, an increase of 0.8 percent (±0.5%) from the previous month and 4.1 percent (±0.7%) above July 2011. Total sales for the May through July 2012 period were up 4.3 percent (±0.5%) from the same period a year ago. The May to June 2012 percent change was revised from -0.5 percent (±0.5%)* to -0.7% (±0.2%).
Retail trade sales were up 0.8 percent (±0.5%) from June 2012 and 3.7 percent (±0.7%) above last year. Nonstore retailers sales were up 11.8 percent (±3.1%) from July 2011 and sporting goods, hobby, book and music stores were up 10.6 percent (±4.3%) from last year.
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.
Andy Pada : "the "ew" of this morning turned into "eh""
Adam Quinones : "the MBA: http://www.mortgagebankers.org/ResearchandForecasts/ProductsandSurveys/NationalDelinquencySurvey.htm"
Michael Gannon : "AQ do you know where the 30 and 60 day numbers are? I dont see them....."
Adam Quinones : "should get you some data Gannon."
Adam Quinones : "FHA Outlook: http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/rmra/oe/rpts/ooe/olmenu"
SMTM : "invientories up isnt gonna bring the rally monkey, but hopefully it hold off a sell off"
Michael Gannon : "does anyone know where or if at all I can find a report on 30 and 60 day delinquencies nationwide or state by state on FHA loans that were originatee in the last 2-3 years?"
Ted Rood : "Inventories up equal good for bonds????? If so, where is the darn rally monkey?"
Matthew Graham : "RTRS- U.S. JUNE BUSINESS SALES -1.1 PCT, LARGEST DROP SINCE MARCH 2009, VS MAY -0.3 PCT (PREV -0.1 PCT) "
Matthew Graham : "RTRS- U.S. JUNE BUSINESS INVENTORIES +0.1 PCT (CONSENSUS +0.2 PCT) VS MAY +0.3 PCT (PREV +0.3 PCT) "
Chris Kopec : ""......Instead of rising by 0.8% Seasonally Adjusted retail sales would have declined from $400.7 billion to $395.5 billion, or a 1.3% decline. ....""
Chris Kopec : "http://www.zerohedge.com/news/mystery-july-retail-sales-beat-solved-it-all-seasonal-adjustment"
Chris Kopec : "According to zero hedge, Retail Sales were subject to a seasonal adjustment (?)"
Andrew Russell : "you can only ignore if the business writes it off"
Scott Valins : "anyone know where I can find the Fannie literature that discusses guideline for ignoring car payment liability if it's expensed properly on tax returns?"
Scott Valins : "its less than zero if you are using those numbers b/c an 8% decline requires more than an 8% gain the next month to get back to "zero""
Paul L. Martin : "So 2 month overall revised sales is 0 (-.8 revised June + .8 July). Color me unimpressed."
Paul L. Martin : "Well I am not buying a light truck now!"
Matthew Graham : "RTRS - OVER 40 PCT OF RISE IN JULY CORE PPI DUE TO INCREASE IN LIGHT TRUCK PRICES-LABOR DEPT "
Matthew Graham : "RTRS- U.S. JULY YEAR-OVER-YEAR PPI +0.5 PCT, SMALLEST RISE SINCE OCT 2009 (CONS +0.5 PCT), CORE +2.5 PCT (CONS +2.3 PCT) "
Victor Burek : "but stayed tune for the afternoon rally"
Oliver S. Orlicki : "going to be a rough day"
Matthew Graham : "RTRS- U.S. JULY PPI EXFOOD/ENERGY +0.4 PCT (CONS +0.2 PCT) VS JUNE +0.2 PCT "
Matthew Graham : "PPI In case anyone is interested: RTRS - - U.S. JULY PPI +0.3 PCT (CONSENSUS +0.2 PCT), VS JUNE +0.1 PCT "
Matthew Graham : "RTRS - US JULY RISES IN RETAIL SALES, SALES EX-AUTOS LARGEST SINCE FEB 2012 "
Scott Valins : "june revised down this will be too"
Matthew Graham : "RTRS - US JULY RETAIL SALES EX-AUTOS/GASOLINE +0.9 PCT VS JUNE -0.4 PCT (PREV -0.2 PCT) "
Matthew Graham : "reports like this keep happening and yeah..."
Victor Burek : "so does this make QE3 less likely?"
Matthew Graham : "RTRS- US JULY RETAIL SALES EX-AUTOS +0.8 PCT (CONS +0.4 PCT) VS JUNE -0.8 PCT (PREV -0.4 PCT) "
Matthew Graham : "RTRS- US JULY RETAIL SALES +0.8 PCT (CONSENSUS +0.3 PCT) VS JUNE -0.7 PCT (PREV -0.5 PCT) "
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