The Day Ahead: Home Prices (Again); Treasury Auctions Begin

By: Matthew Graham

Yesterday's weekly opener was all about how boring the week was likely to be for fundamental, technical, and seasonal reasons alike.  One down and four to go in that regard as the trading session was mostly dead.  Today's session trades in moderately significant economic data (yesterday's Existing Home Sales report) for a somewhat significant Treasury auction (2yr Notes at 1pm).  To be fair, there will be an economic data release this morning at 9am in the form of FHFA monthly Home Prices, but with yesterday's data already containing a read on home prices from June, what more does today's report on May's prices tell us? 

That leaves technicals and tradeflows to set the tone ahead of a 2yr Auction that probably isn't quite up to the task of setting any tones just yet (they've been starting to have an impact on other Treasuries and MBS again after several dormant years, but aren't exactly explosive market movers).  The auction cycle is, however, up to the task of suggesting market participants build in some concession for the new supply that will be absorbed over the next 3 days.  In other words, the amount of new Treasury debt hitting the market minus repayments and Fed buying leaves extra supply. 

Of course markets already knew this and have it mostly priced-in, but it's not uncommon to see a shade of extra weakness heading into auctions themselves.  The time frames can range anywhere from an hour to a few days.  In the current case, the auction concession may be acting to prevent more serious progress for bond markets, or it may have additional weakness to dole out.  Either way, technical levels continue to be challenging until--well... until they're not challenging any more.  So far, we're not there yet, and even when/if we get past 104-10 in Fannie 4.0s, there's another fairly serious technical ceiling at 104-24.  Treasuries main challenge still looks to be 2.46 in 10yr yields.

MBS Live Econ Calendar:

Week Of Mon, Jul 22 2013 - Fri, Jul 26 2013

Time

Event

Period

Unit

Forecast

Prior

Mon, Jul 22

10:00

Existing home sales

Jun

ml

5.26

5.18

Tue, Jul 23

09:00

Monthly Home Price mm

May

%

--

0.7

09:00

Monthly Home Price yy

May

%

--

7.4

13:00

2-Yr Note Auction

--

bl

35.0

--

Wed, Jul 24

07:00

MBA 30-yr mortgage rate

w/e

%

--

4.68

07:00

Mortgage refinance index

w/e

--

--

2351.7

08:58

Markit Manufacturing PMI

Jul

--

52.5

51.9

10:00

New home sales-units mm

Jun

ml

0.485

0.476

13:00

5yr Treasury Auction

--

bl

35.0

--

Thu, Jul 25

08:30

Initial Jobless Claims

w/e

k

340

334

08:30

Durable Goods

Jun

%

1.2

3.7

13:00

7-Yr Note Auction

--

bl

29.0

--

Fri, Jul 26

09:55

Consumer Sentiment

Jul

--

84.0

83.9

* mm: monthly | yy: annual | qq: quarterly | "w/e" in "period" column indicates a weekly report

* Q1: First Quarter | Adv: Advance Release | Pre: Preliminary Release | Fin: Final Release

* (n)SA: (non) Seasonally Adjusted

* PMI: "Purchasing Managers Index"