MBS MID-DAY: Week Starts Slow, But With Gains Intact
By:
Matthew Graham
•
MBS Live: MBS Morning Market Summary
Even though we had a few mid-tier economic releases this morning, the week has gotten off to a slow start, and that's just fine at these levels! Much of the slowness can be chalked up to the absence Japan and China overnight due to holidays. European data and events led equities marginally higher and Italian credit spreads lower as Italy's potentially newly formed government heads toward a "confidence vote" in just under 3 hours. Despite those threats, Treasuries and German Bunds were not much phased. Each moved slightly weaker during first half of Europe's trading day, but a potentially supportive pivot around 1.68% held as a ceiling in 10yr yields, which have since fallen back below 1.66. MBS opened up just a tick off Friday's close but moved higher from the outset. We still haven't made much headway above Friday's highs, but sitting 4 ticks higher on the day at 104-19 in Fannie 3.0s, MBS are in their best shape since mid-January. The fact that all this is occurring despite advancing equities markets seems subtly suggestive of "month-end" portfolio buying demand (whereby money managers must buy Treasuries and/or MBS in order to bring their portfolios in line with various indices). It will also be interesting to see how much of a consideration the EU shapes up to be this week and the upcoming confidence vote could be informative in that regard.
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.
10:13AM :
ECON: Pending Home Sales Higher Than Expected
- Pending Sales +1.5 vs +1.0 Consensus
- Year over Year +7.0
- Market Reaction: Biggest reaction seen in equities, which rallied on the data. Bond markets marginally weaker, but almost exclusively in Treasuries. MBS haven't really moved. Even in Treasuries, the move has been small, with 10's up less than 1bp trough to peak and not only 0.4 bps higher than pre-data levels (1.654 vs 1.658)
Pending home sales increased in March and remain above year-ago levels, but contract activity in recent months shows only modest movement, according to the National Association of Realtors®.
The Pending Home Sales Index,* a forward-looking indicator based on contract signings, rose 1.5 percent to 105.7 in March from a downwardly revised 104.1 in February, and is 7.0 percent above March 2012 when it was 98.8. Pending sales have been above year-ago levels for the past 23 months; the data reflect contracts but not closings.
Lawrence Yun , NAR chief economist, said the market appears to be leveling off. "Contract activity has been in a narrow range in recent months, not from a pause in demand but because of limited supply. Little movement is expected in near-term sales closings, but they should edge up modestly as the year progresses," he said. "Job additions and rising household wealth will continue to support housing demand."
- Year over Year +7.0
- Market Reaction: Biggest reaction seen in equities, which rallied on the data. Bond markets marginally weaker, but almost exclusively in Treasuries. MBS haven't really moved. Even in Treasuries, the move has been small, with 10's up less than 1bp trough to peak and not only 0.4 bps higher than pre-data levels (1.654 vs 1.658)
Pending home sales increased in March and remain above year-ago levels, but contract activity in recent months shows only modest movement, according to the National Association of Realtors®.
The Pending Home Sales Index,* a forward-looking indicator based on contract signings, rose 1.5 percent to 105.7 in March from a downwardly revised 104.1 in February, and is 7.0 percent above March 2012 when it was 98.8. Pending sales have been above year-ago levels for the past 23 months; the data reflect contracts but not closings.
Lawrence Yun , NAR chief economist, said the market appears to be leveling off. "Contract activity has been in a narrow range in recent months, not from a pause in demand but because of limited supply. Little movement is expected in near-term sales closings, but they should edge up modestly as the year progresses," he said. "Job additions and rising household wealth will continue to support housing demand."
9:28AM :
Bond Markets Moderately Positive After Data; Quiet Overnight
The overnight session began in Europe today as Japan and China were out on holiday. This made for tepid overnight volumes and a well-connected risk-on/risk-off trade with German Bunds, which generally held Friday's range. Treasuries too, are drawing support from Friday's levels, and are showing early signs of using the 1.68% area as an inflection point to continue the "lead-off" from last week's range. It was hit twice overnight and held up well.
After those supportive bounces 10's hit the domestic session at 1.67 while MBS opened up just a hair weaker than Friday's latest levels. Both improved slightly, even before the 8:30am data, but added to gains afterword. Meanwhile, stock futures have been steady to slightly stronger after opening higher as well, indicating money flowing into both sides of the market.
Minutes before the cash open for stocks, S&P futures are up 5.5 points. 10yr yields are just under 1bp lower at 1.6564 and Fannie 3.0 MBS are up 5 ticks at 104-20. The only other scheduled data for the morning is Pending Home Sales at 10am ET.
After those supportive bounces 10's hit the domestic session at 1.67 while MBS opened up just a hair weaker than Friday's latest levels. Both improved slightly, even before the 8:30am data, but added to gains afterword. Meanwhile, stock futures have been steady to slightly stronger after opening higher as well, indicating money flowing into both sides of the market.
Minutes before the cash open for stocks, S&P futures are up 5.5 points. 10yr yields are just under 1bp lower at 1.6564 and Fannie 3.0 MBS are up 5 ticks at 104-20. The only other scheduled data for the morning is Pending Home Sales at 10am ET.
8:41AM :
ECON: Income And Outlays Both Rise 0.2 Percent
- Spending +0.2 vs 0.0 Consensus, +0.7 last month
- Income +0.2 vs +0.4 Consensus, +1.1 last month
0 - "Real" Spending +0.3 vs +0.3 last month
- Core PCE Prices +0.0 vs +0.1 consensus
- Market Reaction: Bond markets extending moderate gains.
Personal income increased $30.9 billion, or 0.2 percent, and disposable personal income (DPI) increased $20.7 billion, or 0.2 percent, in March, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $21.0 billion, or 0.2 percent. In February, personal income increased $151.2 billion, or 1.1 percent, DPI increased $134.0 billion, or 1.1 percent, and PCE increased $81.6 billion, or 0.7 percent, based on revised estimates.
Real disposable income increased 0.3 percent in March, compared with an increase of 0.7 percent in February. Real PCE increased 0.3 percent in March, the same as in February.
Personal outlays -- PCE, personal interest payments, and personal current transfer payments -- increased $22.6 billion in March, compared with an increase of $83.1 billion in February. PCE increased $21.0 billion, compared with an increase of $81.6 billion.
- Income +0.2 vs +0.4 Consensus, +1.1 last month
0 - "Real" Spending +0.3 vs +0.3 last month
- Core PCE Prices +0.0 vs +0.1 consensus
- Market Reaction: Bond markets extending moderate gains.
Personal income increased $30.9 billion, or 0.2 percent, and disposable personal income (DPI) increased $20.7 billion, or 0.2 percent, in March, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $21.0 billion, or 0.2 percent. In February, personal income increased $151.2 billion, or 1.1 percent, DPI increased $134.0 billion, or 1.1 percent, and PCE increased $81.6 billion, or 0.7 percent, based on revised estimates.
Real disposable income increased 0.3 percent in March, compared with an increase of 0.7 percent in February. Real PCE increased 0.3 percent in March, the same as in February.
Personal outlays -- PCE, personal interest payments, and personal current transfer payments -- increased $22.6 billion in March, compared with an increase of $83.1 billion in February. PCE increased $21.0 billion, compared with an increase of $81.6 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 : "RTRS- US MARCH PERSONAL SPENDING +0.2 PCT (CONSENSUS UNCH) VS FEB +0.7 PCT (PREV +0.7 PCT)"
Matthew Graham : "RTRS- US MARCH PERSONAL INCOME +0.2 PCT (CONS +0.4 PCT) VS FEB +1.1 PCT (PREV +1.1 PCT)
Victor Burek : "dallas fed manufacturing for april -15.6 vs 5.0 est.
"
Oliver S. Orlicki : "anyone know of a bank who will do a HELOC up to 90% CLTV in Florida?"
Michael Owens : "WV based LO for a refinance?"
Ted Rood : " I can do WV, MO, but not based there."
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