MBS MID-DAY: Another Uneventful Session With Mild Improvements

MBS Pricing Snapshot

- Headline Confidence 60.6 vs 66.0 forecast, 65.4 previous
- "Present Situation" 45.8 vs 45.9 previously
- "Expectations" 70.5 vs 78.4 Previously

The Conference Board Consumer Confidence Index®, which had improved in July, declined in August. The Index now stands at 60.6 (1985=100), down from 65.4 in July. The Expectations Index decreased to 70.5 from 78.4. The Present Situation Index, however, was virtually unchanged, at 45.8 versus 45.9 a month ago.

The monthly Consumer Confidence Survey®, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a leading global provider of information and analytics around what consumers buy and watch. The cutoff date for the preliminary results was August 16.

Says Lynn Franco, Director of Economic Indicators at The Conference Board: "The Consumer Confidence Index is now at its lowest level since late last year (Nov. 2011, 55.2). A more pessimistic outlook was the primary reason for this month's decline in confidence. Consumers were more apprehensive about business and employment prospects, but more optimistic about their financial prospects despite rising inflation expectations. Consumers' assessment of current conditions was virtually unchanged, suggesting no significant pickup or deterioration in the pace of growth."

Data through June 2012, released today by S&P Dow Jones Indices for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, showed that all three headline composites ended the second quarter of 2012 with positive annual growth rates for the first time since the summer of 2010. The national composite was up 1.2% in the second quarter of 2012 versus the second quarter of 2011, and was up 6.9% versus the first quarter of 2012. The 10- and 20-City Composites posted respective annual returns of +0.1% and +0.5% in June 2012. Month-over-month, average home prices in the 10-City Composite were up 2.2% and in the 20-City Composite were up 2.3% versus May. For the second consecutive month, all 20 cities and both Composites recorded positive monthly gains. Eighteen of the 20 MSAs and both Composites posted better annual returns in June as compared to May 2012 – only Charlotte and Dallas saw a deceleration in their annual rates.

MBS are a few ticks improved so far this morning after opening just slightly higher than yesterday's close. The first few hours of the Asian session saw brief, but negligible weakness in Treasuries. Volatility picked up into the European session with the most notable data out of Germany showing Consumer Sentiment unchanged as expected.

Volume was light and a good portion of 10yr futures volume continues to be overstated due to the calendar roll trading discussed yesterday. 10yr yields traded in a range from the 1.63's to 1.65's overnight and are currently at 1.647 while Fannie 3.0s are up 3 ticks at 103-12.

The first data on tap is Case Shiller Home Prices at 9am with the Consumer Confidence report at 10am generally seen as having a better chance to motivate market movement.