MBS MID-DAY: Steady At Weaker Levels Following German Court Decision
By:
Matthew Graham
•
MBS Live: MBS Morning Market Summary
The entire shape of trading this morning seems to have been dictated by the German court decision, as expected. Also as expected, were the details of the decision itself, with the court approving the ESM, but with a set of generally palatable conditions. As we noted in the morning alert, if anything, it was a little less restrictive than it might have been, thus producing a moderate rally for risk markets and selling pressure for bonds. MBS kicked off the day about an eighth of a point weaker from post-roll pricing (in other words, the charts look like we fell further due to the roll). Since bottoming out in the morning hours, we've been holding ground for now and Treasuries have held their ground at 1.76 just after the domestic stock open. We'd note that 1.76 isn't much of a technical level so we're still poised to go either direction today, but with the 10yr auction this afternoon and FOMC tomorrow, we're not expecting epic swings (though if the 10yr auction surprises in one direction or another, it could help us resolve whether we're heading to the 1.80 technical level in 10's or 1.69. MBS should stay relatively insulated in the case of a major sell-off given the generally high expectations of an MBS mention in tomorrow's FOMC festivities).
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.
9:01AM :
ALERT ISSUED:
Bond Markets In Weaker Territory Following German Court Vote
Treasuries and MBS opened in weaker territory after Germany's Constitutional Court approved the ratification of the ESM. The approval was expected, however, and so it was the conditions of the approval that markets have been waiting for. If the conditions made things seem general "tougher to get done" with respect to using the ESM to provide liquidity to troubled Euro-zone states, bond markets likely would have reacted more positively. But as it stands, there aren't any major surprises among the conditions, and at first blush, they actually seem a bit tame.
Markets reacted in logical fashion with Euro stocks gaining and bond markets selling off at a medium pace. The whole experience runs the risk of being anticlimactic though, considering we're only up 4 bps in 10yr Treasuries and down only 7 ticks in Fannie 3.0 MBS (NOTE: the chart may look like we opened down much more than 7 ticks, but that's due to The Roll. Basically, September coupons occupy the left side of the chart while October Coupons have the right, at least for Fannie and Freddie 30's).
The morning's data at home--Import and Export Prices--passed without a trace, leaving the cash stock market opens as the next interesting event, followed by the relatively uninteresting Wholesale Inventories at 10am. The next decidedly interesting event on the calendar is the 10yr Treasury Auction at 1pm.
Markets reacted in logical fashion with Euro stocks gaining and bond markets selling off at a medium pace. The whole experience runs the risk of being anticlimactic though, considering we're only up 4 bps in 10yr Treasuries and down only 7 ticks in Fannie 3.0 MBS (NOTE: the chart may look like we opened down much more than 7 ticks, but that's due to The Roll. Basically, September coupons occupy the left side of the chart while October Coupons have the right, at least for Fannie and Freddie 30's).
The morning's data at home--Import and Export Prices--passed without a trace, leaving the cash stock market opens as the next interesting event, followed by the relatively uninteresting Wholesale Inventories at 10am. The next decidedly interesting event on the calendar is the 10yr Treasury Auction at 1pm.
8:43AM :
ECON: Import Prices Lower Than Expected. Exports Higher
- Import Prices +0.1 vs +1.4 consensus
- Exports Prices +0.9 vs +0.3 consensus
- Petroleum +4.1 vs -2.1 in July
- Non-petroleum prices -0.2 in August, -0.9 year-over-year
U.S. import prices rose 0.7 percent in August, the U.S. Bureau of Labor Statistics reported today, after declining 0.7 percent the previous month. The August increase was the first advance in overall import prices since a 1.4 percent rise in March. Export prices also increased in August, rising 0.9 percent following a 0.4 percent advance in July.
- Exports Prices +0.9 vs +0.3 consensus
- Petroleum +4.1 vs -2.1 in July
- Non-petroleum prices -0.2 in August, -0.9 year-over-year
U.S. import prices rose 0.7 percent in August, the U.S. Bureau of Labor Statistics reported today, after declining 0.7 percent the previous month. The August increase was the first advance in overall import prices since a 1.4 percent rise in March. Export prices also increased in August, rising 0.9 percent following a 0.4 percent advance in July.
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.
Michael Gannon : "so let me get this.....Fannie/Freddie are raising their costs and taking the necessary steps to become a non subject while FHA keeps increasing their fees to cover shortages which I get, but in turn will make it impossible to have a refinance make sense all the while raising the cost for a home buyer which in turn with tough uw standards will lower home prices. all the while indirectly making lenders write less FHA volume which will affect their compare with a drop in volume which in turn will "
Jason York : "so are you saying it would be a tier system like they used to have it?"
Andrew Russell : "►Give HUD the authority to charge up to a maximum premium of 2.05 percent annually on mortgage insurance (MI);
►Establish a minimum annual premium for MI of 0.55 percent;
►Bar unscrupulous lenders from participating in the program;
►Require repayment of losses to FHA by lenders who committed fraud;
►Improve the FHA’s internal financial controls, transparency, and disclosure requirements; and
►Require the Government Accountability Office (GAO) to conduct an independent safety and soundness r"
Steven Klodzin : "I havent read it enough, but it almost looked like the sovency act would allow premium changes on exsisting FHA mortgages. I just read it briefly though so i may be way off."
Steven Stone : "but they are going to cause another bailout to be required"
Steven Stone : "no i dont think thats it...they dont want another bailout"
Jude Bridwell : "Problem is you have people making laws up there that can afford anything they want. They don't think about how it may affect the average Joe."
Steven Stone : "and one thing i have learned is that when you are running a ponzi scheme, you do whatever you can to bring in more money...you dont raise prices."
Steven Stone : "but what they do not realize is that the FHA does not operate in a vacuum"
Steven Stone : "im thinking it means they are trying to raise the premiums again"
Michael Gannon : "can someone decipher this FHA solvency act for me please since Im a bit slow and cant seem to grasp myself "
Jeff Anderson : "So somewhere around 103 form MBS'. Got it. Thanks."
Matthew Graham : "MBS, 103, 103, and 103 on the downside, 103-10 and 103-14 upside"
Matthew Graham : "in terms of 10's, 1.798 and 1.86 on the weak side. 1.69-ish continues to be the challenge on the positive side since y'day afternoon."
Jeff Anderson : "GM, MG. What do you see for key pivots today?"
Matthew Graham : "RTRS - U.S. AUGUST NON-PETROLEUM YEAR-OVER-YEAR IMPORT PRICE DECLINE STEEPEST SINCE NOVEMBER 2009 "
Matthew Graham : "RTRS- U.S. AUGUST IMPORT PRICES INCREASE FOR FIRST TIME IN 5 MONTHS "
Matthew Graham : "RTRS - U.S. AUG IMPORT PRICES +0.7 PCT (CONS. +1.4 PCT) VS JULY -0.7 PCT (PREV -0.6 PCT) "
Victor Burek : "starts today..i locked a couple yesterday, but have quite a few floaters"
Brayden Alexander : "Thx vb. meeting begin today right? Vb sails hoisted?"
Victor Burek : "announcement tomorrow"
Brayden Alexander : "Gm all. FOMC today or tomo?"
Jeff Anderson : "Seems like the market kind of had the court rulings priced in already IMO? Conditions weren't over the top, but let them know where they stand kind of?"
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