MBS MID-DAY: Holding Moderate Gains, Waiting For FOMC Minutes

MBS Pricing Snapshot

- Index at 46 vs 48 consensus, 47 last month
- Current Single-Family Home Sales 51 vs 52 last time
- Prospective Buyers Index 32 vs 36 last time
- 6 month outlook 50 vs 49 last time
- Market reaction: mostly "none." The bigger swings in stocks and bonds were 10 minutes before the data and driven by a few quick shots of equities' bullishness. If anything, the weaker-than-expected data gave pause to that momentum, or at the very least, refused to endorse it.

Builder confidence in the market for newly built, single-family homes was virtually unchanged in February with a one-point decline to 46 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today.

“Following solid gains over the past year, builder confidence has essentially leveled out and held in the same three-point range over the last four months,” noted NAHB Chairman Rick Judson, a home builder from Charlotte, N.C. “This is partly due to ongoing uncertainties about job growth and consumer access to mortgage credit, but it’s also a reflection of the fact that builders are now confronting rising costs for building materials and, in some markets, limited availability of labor and lots as demand for new homes strengthens.”

It would be nice to see trading levels so close to home after every three day weekend in a market that, in general, pays a less than insignificant amount of attention to overseas markets currently. To put that more simply, with domestic bond markets taking their fair share of cues from Europe and Asia, and with Europe and Asia not out for President's Day yesterday, it's nice to see trading levels this Tuesday morning, roughly in line with Friday afternoon's.

What little movement there was overnight was seen in a micro range of 1.99 to 2.007 in 10yr yields. Asian stocks declined with the second leg down into the close getting more chase from overnight Treasuries, but as per usual, US 10's saw more movement and volume into the European session where rising equities helped put the floor in for yields. Germany's ZEW data showed stronger sentiment, but weaker "current conditions" and was ultimately a positive factor for bonds, essentially preserving the narrow range into the domestic open.

S&P futures advanced overnight but aren't yet back to levels that challenge Friday's highs (up just over 2 points from Friday's close). 10yr yields are just over 1bp lower at 1.9913 and Fannie 3.0s are currently up 2 ticks at 102-30. The only scheduled data of the morning is NAHB Housing Market Index at 10am, and beyond that, there's a growing sense of anticipation for tomorrow's FOMC Minutes.