MBS MID-DAY: Rallying In Spite Of Data, In Concert With Other Markets

MBS Pricing Snapshot

- 4.82 mln unit annual rate vs 4.55 mln consensus
- Highest since May 2010
- Inventory 2.47 mln units vs 2.4 mln in July
- 22 pct distressed vs 24 pct in July
- Median price +9.5 pct Year over Year.

From NAR:
Existing-home sales continued to improve in August and the national median price rose on a year-over-year basis for the sixth straight month, according to the National Association of Realtors.

Total existing-home sales 1 , which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 7.8 percent to a seasonally adjusted annual rate of 4.82 million in August from 4.47 million in July, and are 9.3 percent higher than the 4.41 million-unit level in August 2011.

Lawrence Yun , NAR chief economist, said favorable buying conditions get the credit. "The housing market is steadily recovering with consistent increases in both home sales and median prices. More buyers are taking advantage of excellent housing affordability conditions," he said. "Inventories in many parts of the country are broadly balanced, favoring neither sellers nor buyers. However, the West and Florida markets are experiencing inventory shortages, which are placing pressure on prices."

Treasury yields and risk markets were initially higher in the overnight session after the Bank of Japan expanded it's existing quantitative easing program by ¥80 trillion ($127 bln) and doing away with it's minimum 0.1 pct bidding yield for purchases of long term government bonds. 10yr yields moved roughly 3 bps higher on the news but along with stock futures, moved flat from there before reversing course into the European session.

German Bunds led the charge back to lower yields after a much stronger than expected auction of shorter term German debt. 10yr Treasuries hit the 8am open at 1.79 and have shed another tick since a slightly weaker than expected Housing starts report.

Fannie 3.0s started out in a narrow range near yesterday's highs, but have extended gains over the past few minutes, taking them 10 ticks higher from yesterday's close at 104-14. These are the highest prices seen since 3.0s were on the way down after hitting all-time highs last Friday.

The only other scheduled data of the morning hits in about an hour with Existing Home Sales. Consensus calls for a 4.55 mln annual rate vs 4.47 mln last month. This would equate to a 2.0 pct gain.

Quick Notes: Headline Starts +2.3, at a 750k annual rate. Consensus was for 765k, and July was revised down from 746k to 733k. Permits fell 1 pct to an 803k annual rate vs a 796k forecast. Single family starts rose 5.5 pct to 535k annual rate (highest since 4/2010)

BUILDING PERMITS
Privately-owned housing units authorized by building permits in August were at a seasonally adjusted annual rate of 803,000. This is 1.0 percent (±1.2%)* below the revised July rate of 811,000, but is 24.5 percent (±1.7%) above the August 2011 estimate of 645,000. Single-family authorizations in August were at a rate of 512,000; this is 0.2 percent (±0.8%)* above the revised July figure of 511,000. Authorizations of units in buildings with five units or more were at a rate of 263,000 in August.

HOUSING STARTS
Privately-owned housing starts in August were at a seasonally adjusted annual rate of 750,000. This is 2.3 percent (±10.2%)* above the revised July estimate of 733,000 and is 29.1 percent (±12.8%) above the August 2011 rate of 581,000. Single-family housing starts in August were at a rate of 535,000; this is 5.5 percent (±10.4%)* above the revised July figure of 507,000. The August rate for units in buildings with five units or more was 208,000.

HOUSING COMPLETIONS
Privately-owned housing completions in August were at a seasonally adjusted annual rate of 689,000. This is 0.7 percent (±18.8%)* above the revised July estimate of 684,000 and is 11.7 percent (±17.5%)* above the August 2011 rate of 617,000. Single-family housing completions in August were at a rate of 489,000; this is 5.4 percent (±14.3%)* above the revised July rate of 464,000. The August rate for units in buildings with five units or more was 193,000.