MBS MID-DAY: Slight Boost From Weaker Data, Still Range-Bound

By: Matthew Graham
MBS Live: MBS Morning Market Summary
The overnight session started out flat for bond markets and grew weaker in the early hours of the morning.   A push back against the moderate weakness started taking shape between 6-8am New York time.  MBS opened up in relatively neutral territory and made gains following the weaker-than-expected Durable Goods data.  For both MBS and Treasuries, said gains were fairly limited and we've since been drifting uneventfully sideways to slightly improved.  Treasuries exhibited slightly more volatility in this regard, but it looks like a factor of the 10:15-11:00am fed buying operation, with levels getting quickly back to their 830am-1015am range.  Next up is the 5yr Treasury Auction which has some potential for movement, but likely nothing earth-shattering.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
104-10 : +0-04
FNMA 3.5
106-13 : +0-03
FNMA 4.0
106-31 : +0-01
FNMA 4.5
107-25 : +0-01
GNMA 3.0
106-02 : +0-04
GNMA 3.5
108-25 : +0-03
GNMA 4.0
109-18 : +0-03
GNMA 4.5
109-02 : -0-05
FHLMC 3.0
103-29 : +0-04
FHLMC 3.5
106-04 : +0-02
FHLMC 4.0
106-22 : +0-01
FHLMC 4.5
106-31 : +0-01
Pricing as of 11:05 AM EST
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.

9:23AM  :  Bond Markets Break Even After Data; No Resounding Victory
The overnight session was largely uneventful for bond markets as Treasuries were almost perfectly flat during Asian hours despite an uptick in equities markets. Bond got on-board with the gentle "risk-on" trade just before European hours, drifting higher in yield from 1.70 to 1.72+.

Domestic accounts started pushing back against the overnight weakness well ahead of the weaker-than-expected Durable Goods report. Similarly, stocks had been sliding since 6am New York time. MBS had opened roughly in line with yesterday's latest levels, stumbled momentarily and regained their footing just ahead of the data.

After the data hit, bond markets extended gains modestly and equities markets moved a bit lower in price. In an earlier update, we noted: "So far the reaction is moderately positive, which is to be expected given the weaker data. If it seems like the reaction should be "more positive," that could be due to the cyclical nature of the report which often sees the bigger gaining months followed by bigger contractions. Today's was only a big miss versus economists' consensus, but not at all outside the historical range of "misses."

Fannie 3.0s are currently up 1 tick on the day at 104-08, and 10yr yields are unchanged at 1.7064. Just slightly lower than that, the 1.700-1.703 internal trendline is once again offering tough resistance this morning, These yields aren't the bottom of the recent range, of course, but have come into play several times since the beginning of last week either as support or resistance. They were tested overnight and again after the Durables data and thus far have held firm.

Scheduled economic reports are done for the day, but the stock market open could offer some guidance. Additionally, today's 5yr Treasury Auction at 1pm is more significant than yesterday's 2yr auction was yesterday (which was "not at all" significant).
8:38AM  :  ECON: Durable Goods Orders Much Weaker Than Expected
- Headline Durable Goods -5.7 vs -2.8 consensus
- Last month revised to +4.3 vs +5.6
- excluding transportation -1.4 vs +0.5 consensus
- ex-defense -4.7 vs -2.3 consensus

- Market Reaction: Markets were expecting a weaker result, but to see some improvement when transportation was factored out (due to a drop in Boeing orders), but even that metric managed a big miss. So far the reaction is moderately positive, which is to be expected given the weaker data. If it seems like the reaction should be "more positive," that could be due to the cyclical nature of the report which often sees the bigger gaining months followed by bigger contractions. Today's was only a big miss versus economists' consensus, but not at all outside the historical range of "misses."

New orders for manufactured durable goods in February increased $12.4 billion or 5.7 percent to $232.1 billion, the U.S. Census Bureau announced today. This increase, up five of the last six months, followed a 3.8 percent January decrease. Excluding transportation, new orders decreased 0.5 percent. Excluding defense, new orders increased 4.5 percent. Transportation equipment, up two of the last three months, drove the increase, $13.3 billion or 21.7 percent to $74.4 billion. This was led by nondefense aircraft and parts, which increased $9.0 billion.
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.

Matthew Graham  :  "(something else to consider ahead of next week's ECB Announcement): RTRS- ECB'S CONSTANCIO - ASKED ABOUT INTEREST RATES, SAYS HAVE SOME MARGIN OF MANOEUVRE, STAND READY TO ACT IF ECONOMIC DATA IS BAD "
Nate Miller  :  "forces the hand to stop using that lender/amc"
Blair J. Beard  :  "what is the secret to fighting appraisals?we've had 4 come in recently from the same appraiser and they're all low. "
Matthew Graham  :  "(something to keep in mind ahead of next week's ECB Announcement): RTRS- ECB'S ASMUSSEN SAYS EFFECTIVENESS OF A RATE CUT IS LIMITED BECAUSE TRANSMISSION MECHANISM IMPAIRED - FT "
Brayden Alexander  :  "TR, when i run into these situation I try to explain that every month they wait they are losing a potential savings of 175 (in your case) and that even if rate do drop, it will take them 7 months to make up what they could have saved today. Time power of money"
Matt Hodges  :  "Ted, you are valued LO that any client would be fortunate to know and work with"
Ted Rood  :  "My borrowers said they would start the loan once rates got to .25% better than they've ever been, gonna stay at 5.75% till then."
Oliver S. Orlicki  :  "1.70 is tough nut to crack"
Victor Burek  :  "sounds like a seasoned pro ECB member"
Brent Borcherding  :  "Is Mersch new here?"
Victor Burek  :  "haha"
Matthew Graham  :  "no comment..."
Matthew Graham  :  "RTRS- ECB'S MERSCH SAYS DO NOT THINK ANOTHER EUROPEAN COUNTRY WILL SLUMP INTO TROUBLE "
Matthew Graham  :  "Colbert's coverage of the Reinhart/Rogoff v. Herndon debacle is awesome btw..."
Jeff Anderson  :  "GM, all. Other than housing it seems most other reports are in a soft patch. 2010, 2011, 2012 and now. Deja vu, all over again."
Matthew Graham  :  "RTRS- U.S. MARCH DURABLES EX-DEFENSE -4.7 PCT, BIGGEST DECLINE SINCE AUGUST (CONS -2.3 PCT) VS FEB +3.4 PCT (PREV +4.4 PCT)"
Victor Burek  :  "even revisions were worse"
Matthew Graham  :  "RTRS - U.S. MARCH DURABLES EX-TRANSPORTATION -1.4 PCT (CONS +0.5 PCT) VS FEB -1.7 PCT (PREV -0.7 PCT) "
Oliver S. Orlicki  :  "big miss"
Matthew Graham  :  "RTRS- US MARCH DURABLES ORDERS -5.7 PCT, BIGGEST DECLINE SINCE AUGUST (CONSENSUS -2.8 PCT) VS FEB +4.3 PCT (PREV +5.6 PCT) "
Victor Burek  :  "another pretty big miss"
Oliver S. Orlicki  :  "data time"

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