MBS MID-DAY: Quick but Relatively Contained Losses, Now Drifting
By:
Matthew Graham
•
MBS Live: MBS Morning Market Summary
Note the timestamp in the pricing snapshot below. Only a few minutes after that, MBS and Treasuries sold off fairly quickly but fairly moderately. Fannie 3.5s are now down 6 ticks on the day at 101-13 and at least one lender has repriced negatively so far. The most likely suspect behind the mid-day volatility is the combined effect of low volumes and the Fed's scheduled buying operation ending just after 11am. Furthermore, bond markets have not been bullish here on the first two days of the week and much of the levity can be chalked up to short-covering of longer term positions ahead of tomorrow's ADP data. That doesn't necessarily mean the recent rally was "fake," but it does add credence to the assessment that it was leveling off yesterday. Prices are now at the mercy of low-volume pre-holiday drift. An update from MBS Live in this afternoon's recap will go into greater detail on the morning volatility.
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.
10:06AM :
ECON: Factory Orders in Line With Expectations
- Factory Orders +2.1 vs +2.0 forecast
- Previous month revised to +1.3 from +1.0
- Durable Goods revision from +3.6 to +3.7
- Reaction: limited at best and perhaps undetectable.
New orders for manufactured goods in May, up three of the last four months, increased $9.9 billion or 2.1 percent to $485.0 billion, the U.S. Census Bureau reported today. This followed a 1.3 percent April increase. Excluding transportation, new orders increased 0.6 percent.
Shipments, up following two consecutive monthly decreases, increased $4.6 billion or 1.0 percent to $483.6 billion. This followed a 0.7 percent April decrease.
Unfilled orders, up three of the last four months, increased $8.2 billion or 0.8 percent to $1,004.8 billion. This followed a 0.3 percent April increase. The unfilled orders-to-shipments ratio was 6.21, down from 6.28 in April.
Inventories, up six consecutive months, increased $0.3 billion to $627.8 billion. This was at the highest level since the series was first published on a NAICS basis in 1992, and followed a 0.1 percent April increase. The inventories-to-shipments ratio was 1.30, down from 1.31 in April.
- Previous month revised to +1.3 from +1.0
- Durable Goods revision from +3.6 to +3.7
- Reaction: limited at best and perhaps undetectable.
New orders for manufactured goods in May, up three of the last four months, increased $9.9 billion or 2.1 percent to $485.0 billion, the U.S. Census Bureau reported today. This followed a 1.3 percent April increase. Excluding transportation, new orders increased 0.6 percent.
Shipments, up following two consecutive monthly decreases, increased $4.6 billion or 1.0 percent to $483.6 billion. This followed a 0.7 percent April decrease.
Unfilled orders, up three of the last four months, increased $8.2 billion or 0.8 percent to $1,004.8 billion. This followed a 0.3 percent April increase. The unfilled orders-to-shipments ratio was 6.21, down from 6.28 in April.
Inventories, up six consecutive months, increased $0.3 billion to $627.8 billion. This was at the highest level since the series was first published on a NAICS basis in 1992, and followed a 0.1 percent April increase. The inventories-to-shipments ratio was 1.30, down from 1.31 in April.
9:29AM :
Bond Markets Holding Mostly Steady At Slightly Weaker Levels
Markets continue to be on vacation mode with this morning's volume situation roughly in line with yesterday's. Treasuries were flat during Asian hours and rallied mildly into the 2.45's as buzz in European markets (including an MNSI story particularly on the topic) grew louder that Draghi is set to (or is being pushed to) offer more 'forward guidance' at Thursday's ECB Announcement. That said, pre-ECB speculation has been nothing if not an exercise in crying wolf, and we have yet to see one (that is to say that we keep expecting bigger things out of the ECB than we actually get).
The focus is clearly on NFP and domestic markets. In fact, domestic market reinforced that truth by quickly taking chart of global bond market trading momentum when domestic traders started up for the day (doesn't take much in this volume, but still!). 10 yr yields began to rise from overnight lows into US hours and trended higher until hitting overnight highs just under 2.49.
For their part, MBS opened up flat and shed 2 ticks during the morning weakness. Having earned one of those back, they now sit 1 tick lower on the day at 101-18. Everything seen so far is very much in line with the triangle on this morning's chart in The Day Ahead commentary--calmer, narrower ranges at least into ADP tomorrow.
Only scheduled data today is Factory Orders at 10am. Not an edge-of-the-seat event, but could have a slight impact in thin markets with no other data on tap.
The focus is clearly on NFP and domestic markets. In fact, domestic market reinforced that truth by quickly taking chart of global bond market trading momentum when domestic traders started up for the day (doesn't take much in this volume, but still!). 10 yr yields began to rise from overnight lows into US hours and trended higher until hitting overnight highs just under 2.49.
For their part, MBS opened up flat and shed 2 ticks during the morning weakness. Having earned one of those back, they now sit 1 tick lower on the day at 101-18. Everything seen so far is very much in line with the triangle on this morning's chart in The Day Ahead commentary--calmer, narrower ranges at least into ADP tomorrow.
Only scheduled data today is Factory Orders at 10am. Not an edge-of-the-seat event, but could have a slight impact in thin markets with no other data on tap.
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.
Ira Selwin : "(as MG said in the morning update "Bowling With Bumpers For One More Day?")"
Ted Rood : "If that's the case today, what will tomorrow be like?"
Jason Zimmer : "i like snoozers. it's kinda nice to quote someone at 9am and be able to honor it at 9:30am"
Ira Selwin : "looks to be a snoozer today "
Matthew Graham : "RTRS- U.S. MAY FACTORY ORDERS EX-TRANSPORTATION +0.6 PCT VS APRIL +0.2 PCT (PREV -0.1 PCT) "
Matthew Graham : "RTRS- U.S. MAY DURABLES ORDERS REVISED TO +3.7 PCT FROM +3.6 PCT "
Matthew Graham : "RTRS - U.S. MAY FACTORY ORDERS +2.1 PCT (CONSENSUS +2.0 PCT) VS APRIL +1.3 PCT (PREV +1.0 PCT) "
Victor Burek : "full day Friday, and 1pm close tomorrow"
Jason York : "do the markets close early tomorrow, and what is the schedule for Friday?"
Matthew Graham : "but like my favorite TV show would say, don't take my word for it: http://screencast.com/t/lb2vjoANw9fc"
Gus Floropoulos : "MG, considering how important QE has been for stocks, when you can, compare mbs vs S&P's, or tsy'svss&p's on a chart covering say from mid May....."
Matthew Graham : "RTRS- STONEGATE MORTGAGE CORPORATION PLANS TO CONDUCT INITIAL PUBLIC OFFERING OF ITS COMMON STOCK "
Ken Crute : "don't think things need to be "rosy" for tapering, just not as bad as they were "
Victor Burek : "I agree mg, think we have more to gain then lose this Friday, but very risky to float"
Matthew Graham : "yeah? I don't disagree we have a lot to lose, but I'm not sure if it's more than we have to gain. What does a stellar report do and what does an awful report do? Is the Fed really going to be pushed into July meeting tapering by a good report? And if the consensus is for September Tapering is a great NFP going to make that any more painful if it can't (probably) make that any more near term? Conversely, what happens on a negative print? The September time frame would be questioned, and Fan"
Justin Harward : "I think we have a lot more to loose on Friday then potentially gain"
Christopher Stevens : "Ray you have been reading too much about Snowden. There is no way NFP/UE number has been leaked."
Matthew Graham : "the U/E forecast is 7.5. This is a consensus estimate based on polls of 70+ economists"
Ray Younger : "Love the humor MG. But I think we know that there are expectations that the market leaks and if correct we can loose recent gains in MBS"
Matthew Graham : "there are no rumors on the street. That would require people actually being on the street."
Christopher Stevens : "MG- that 10YR chart you posted this morning scares the heck out of me. That is one tightly coiled snake."
Ray Younger : "Just what is in the media this morning, from rumors on the street. I know that isn't reliable but we know from history things are leaked"
Victor Burek : "it isn't a rumor that unemployment drops to 7.5%, that is the markets expectation"
Ray Younger : "Charts are slightly positive this morning, yes. But can we rely on things staying that way tomorrow after the data"
Mike Drews : "GM.....the trend is apparently still our friend."
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