MBS MID-DAY: Steady At Stronger Levels Despite Data, Greek Deal

MBS Pricing Snapshot

- Confidence 73.7 vs 73.0 Consensus
- Last month revised from 72.2 to 73.1
- 'Present Situation' FELL to 56.6 from 56.7
- Biggest gains in 'Expectations,' up to 85.1 vs upwardly revised 84.0 in October (previously 82.9)

The Conference Board Consumer Confidence Index®, which had increased in October, posted a moderate increase in November. The Index now stands at 73.7 (1985=100), up from 73.1 in October. The Present Situation Index was virtually unchanged at 56.6 versus 56.7 last month. The Expectations Index rose to 85.1 from 84.0 last month.

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 November 13.

Says Lynn Franco, Director of Economic Indicators at The Conference Board: “The Consumer Confidence Index increased in November and is now at its highest level in more than four and a half years (76.4 Feb. 2008). This month’s moderate improvement was the result of an uptick in expectations, while consumers’ assessment of present-day conditions continues to hold steady. Over the past few months, consumers have grown increasingly more upbeat about the current and expected state of the job market, and this turnaround in sentiment is helping to boost confidence.”

As we perused headlines about Greece's debt deal last night and this morning, we were struck by the lack of attention paid to the fact that the supposed December 13th bailout payment is far from a done deal and remains contingent on the parliamentary approval by Eurozone member states. Sarcastically, The Day Ahead this morning mentioned that "member states" = "Germany," and no sooner have domestic markets begun their trading day than we're already seeing headlines from German officials offering up reasons for delay and/or rejection of the current form of the bailout agreement.

Even if most news outlets failed to hone in on that critical issue ahead of time, markets did not. While German Bunds began their day in much higher territory, at least half of their move higher was implied by late action in US Treasuries and the other half was almost immediately unwound. Both Bunds and TSYs rallied roughly 4bps lower from 2am to 5:30am. That was essentially a push back against the "risk-on" suggestion of the debt deal and those 4 bps were as much as bond markets got before again moving slightly higher in yield.

Despite the healthy ebbs and flows, overnight yield highs held just before and after the domestic open with 10's going no higher than 1.675. MBS opened up a tick or two weaker but have generally held their ground perfectly within the high end of yesterday's range, finding support at yesterday afternoon's lows (104-26 in Fannie 3.0s). Stock futures climbed in the overnight session but are now back underneath yesterday's 4pm levels as the domestic cash open approaches.

Stateside economic data this morning has largely been a non-event. While there was a brief gyration following the better-than-expected Durable Goods report, it was mostly brief and not too much of a gyration. A few fence-sitters took note of the ground-holding and brought both Treasuries and MBS quickly back to their best levels of the morning. Case-Shiller Home Price data isn't typically much of a market mover, and came in as-expected this time anyway, leaving it almost completely off the radar for market moving guidance this morning.

Stocks and bonds have been reasonably well connected, so we'll observe that potential ongoing correlation as we await Consumer Confidence data at 10am and another round of Fed "Twist" buying at 10:15am. Fannie 3.0s are currently up 3 ticks on the day at 104-31 and 10yr yields are down just under 1 bp at 1.659

- 20 City Index +0.4 vs +0.4 Consensus and Previous
- Unadjusted +0.3 vs +0.5 Consensus
- Year over year +3.0 pct vs +2.9 pct Consensus

Data through September 2012, released today by S&P Dow Jones Indices for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, showed that home prices continued to rise in the third quarter of 2012. The national composite was up 3.6% in the third quarter of 2012 versus the third quarter of 2011, and was up 2.2% versus the second quarter of 2012. In September 2012, the 10- and 20-City Composites showed annual returns of +2.1% and +3.0%. Average home prices in the 10- and 20-City Composites were each up by 0.3% in September versus August 2012. Seventeen of the 20 MSAs and both Composites posted better annual returns in September versus August 2012; Detroit and Washington D.C. recorded a slight deceleration in their annual rates, and New York saw no change.

- Headline Durable Goods 0.0 vs -0.6 Consensus
- Excluding transportation +1.5 vs -0.5 Consensus
- Ex-Defense & Aircraft +1.7, Most since May 2012,

New orders for manufactured durable goods in October increased slightly to $216.9 billion, the U.S. Census Bureau announced today. This increase, up five of the last six months, followed a 9.2 percent September increase. Excluding transportation, new orders increased 1.5 percent. Excluding defense, new orders increased 0.1 percent.

Machinery, up two consecutive months, had the largest increase, $0.9 billion or 2.9 percent to $30.9 billion.