MBS MID-DAY: Range-Bound Rally Continues; Pin-drop Quiet
By:
Matthew Graham
•
MBS Live: MBS Morning Market Summary
So far today, we've seen one of the quietest, least-offensive post-data rallies in recent memory. The overnight session set the stage for a quiet day overall with London being out for the day. US Markets, on the other hand, are trading, but you have to look pretty closely to be able to see it. Weaker-than-expected Durable Goods Orders propelled bond prices higher at 8:30am but almost nothing has happened since then. 10yr yields have held perfectly between 2.80 and 2.784 after being closer to 2.83 to start the day. MBS are outperforming with Fannie 4.0s grinding sideways but slightly higher since the data.
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.
9:06AM :
Bond Markets Rally Following Durable Goods Data
The overnight session was so quiet and flat that it only deserves one sentence of mention. The only trading of consequence began after this morning's Durable Goods report which came in significantly weaker than expected. All the internal metrics were weaker to boot (whereas one can usually find at least one counterpoint to the suggestion of the headline).
In this case, however, the counterpoint may be the volatile nature of the report itself, combined with the fact that the past three reports had been strongly positive. The last time this report came in positive at least 3 months in a row was last summer and the 'miss' that followed was even bigger than today's.
Additionally the 4-week moving average actually ROSE. Bottom line, it's not as clear a signal as many of this week's other reports would be, should they happen to miss by a similar margin.
All that notwithstanding, it has been resulted in a moderate rally for MBS and Treasuries, thought the first bounce may already be in. 10's moved down to 2.784 and ar back up to 2.798 currently. Fannie 4.0s hit 103-03 and are now at 103-01--still 8 ticks higher day-over-day. There are no more major economic reports on tap for today.
In this case, however, the counterpoint may be the volatile nature of the report itself, combined with the fact that the past three reports had been strongly positive. The last time this report came in positive at least 3 months in a row was last summer and the 'miss' that followed was even bigger than today's.
Additionally the 4-week moving average actually ROSE. Bottom line, it's not as clear a signal as many of this week's other reports would be, should they happen to miss by a similar margin.
All that notwithstanding, it has been resulted in a moderate rally for MBS and Treasuries, thought the first bounce may already be in. 10's moved down to 2.784 and ar back up to 2.798 currently. Fannie 4.0s hit 103-03 and are now at 103-01--still 8 ticks higher day-over-day. There are no more major economic reports on tap for today.
8:38AM :
ECON: Durable Goods Much Weaker Than Expected
- Durable Goods -7.3 vs -4.0 forecast
- Excluding Transportation -0.6 vs +0.5 forecast
- Excluding Aircraft/Defense -3.3 vs +0.5 forecast
- Largest Decline since August 2012
New orders for manufactured durable goods in July decreased $17.8 billion or 7.3 percent to $226.6 billion, the U.S. Census Bureau announced today. This decrease, down following three consecutive monthly increases and followed a 3.9 percent June increase. Excluding transportation, new orders decreased 0.6 percent. Excluding defense, new orders decreased 6.7 percent.
Transportation equipment, also down following three consecutive monthly increases, led the decrease, $16.7 billion or 19.4 percent to $69.7 billion. This was led by nondefense aircraft and parts, which decreased $14.5 billion.
- Excluding Transportation -0.6 vs +0.5 forecast
- Excluding Aircraft/Defense -3.3 vs +0.5 forecast
- Largest Decline since August 2012
New orders for manufactured durable goods in July decreased $17.8 billion or 7.3 percent to $226.6 billion, the U.S. Census Bureau announced today. This decrease, down following three consecutive monthly increases and followed a 3.9 percent June increase. Excluding transportation, new orders decreased 0.6 percent. Excluding defense, new orders decreased 6.7 percent.
Transportation equipment, also down following three consecutive monthly increases, led the decrease, $16.7 billion or 19.4 percent to $69.7 billion. This was led by nondefense aircraft and parts, which decreased $14.5 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.
Scott Rieke : "Well, yes, rates rallied before QE started because the market front-ran it. You don't buy when they are, you buy in anticipation at a lower price, then sell to the fed."
Gus Floropoulos : "JR is right, the actual QE hitting the market was always better for stock, leaving us questioning the merits of QE. Traders rule"
Jeff Anderson : "Nice move from 102 to 103 from Friday AM. Glad volatility has gone away."
Scott Rieke : "I was actually going to do some investigation work today on the matter. The difference between now and QE1 or 2 is the programs had designated sizes and terms. Not in this case."
John Rodgers : "When QE1 ended rates fell before they announced QE2"
Scott Rieke : "Short-term cash hoarding isn't uncommon"
Scott Rieke : "sitting on cash as an alternative to rotation, that is."
Scott Rieke : "Read an interesting piece this weekend discussing the positive impact for rate with QE tapering... could be a stretch, but they argued it would be positive rates since equites would get hit and cause correction. I think there's flaws with the argument because it misses that QE doesn't stop entirely so equities are really fine because the spigot is still open, and I think the writer misses the concept of sitting on cash."
Matthew Graham : "It's frustrating that it's THIS report that misses so big this week as it's one of the most volatile--fluctuating regularly between positive and negative. The last three reports had been positive, which hadn't happened since last summer. The 'miss' that followed those reports was even bigger. Additionally the 4-week moving average actually ROSE. Bottom line, it's not as clear a signal as many of this week's other reports would be, should they happen to miss by a similar margin."
Andy Pada : "so the last two leading indicators suggest economy getting worse"
Victor Burek : "It's a leading indicator of production - rising purchase orders signal that manufacturers will increase activity as they work to fill the orders"
Victor Burek : "Change in the total value of new purchase orders placed with manufacturers for durable goods, excluding transportation items"
Andy Pada : "what does the durable goods number represent?"
Christopher Stevens : "Wow that'sa big red number"
Jason Sheaffer : "That should help our cause"
Matthew Graham : "RTRS- US JULY TOTAL DURABLES, DURABLES EX-DEFENSE DECLINES LARGEST SINCE AUG 2012 "
Matthew Graham : "RTRS- U.S. JULY DURABLES EX-DEFENSE -6.7 PCT (CONS -2.6 PCT) VS JUNE +2.9 PCT (PREV +2.8 PCT) "
Andrew Russell : "Nice week of green, bad NFP next Friday, then poof! "
Matthew Graham : "RTRS- U.S. JULY DURABLES EX-TRANSPORTATION -0.6 PCT (CONS +0.5 PCT) VS JUNE +0.1 PCT (PREV -0.1 PCT) "
Matthew Graham : "RTRS- US JULY DURABLES ORDERS -7.3 PCT (CONSENSUS -4.0 PCT) VS JUNE +3.9 PCT (PREV +3.9 PCT) "
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