MBS MID-DAY: Back to Best Levels Ahead of Fed

MBS Pricing Snapshot

Hearing that Boehner speech on debt ceiling is rattling bond markets a bit at the moment. Pre-FOMC antsiness doesn't help. 10's have shot up a quick 3 bps to 2.89 and Fannie 4.0s down a quick 4 ticks to 102-24. This is just on the edge of negative reprice risk.

Treasuries tell a better story than MBS today as the latter are just a bit outside yesterday's range. Treasuries, on the other hand, are perfectly defined by yesterday's range. Overnight low yields stopped just before hitting yesterday's lows before rising steadily to yesterday's highs.

Housing starts were merely a bump in that road, if anything. While the headline was weaker than expected, the internals showed that single-family construction was actually pretty strong. This may have added a slight bit of pressure to bond markets, but it's hard to pick out from the prevailing trend from 4am

Bank of England's lack of policy change is being credited with that weakness, but it looks like European bonds 'cared' while Treasuries did was they were going to do anyway.

For their part, MBS opened up in line with yesterday's latest levels and fell a few ticks before the Housing Starts data and another tick after that. Fannie 4.0s dipped to 102-25 from 102-28 opening highs, but are holding ground at 102-26 currently.

Economic data is done for today, and all eyes are on the afternoon's FOMC Events. The Announcement (the document that may spell out tapering plans) and the economic projections are out at 2pm while Bernanke's Press Conference BEGINS at 2:30pm, creating tape-bomb potential until at least 3pm.

- Starts 891k vs 917k forecast
- Permits 918k vs 950k forecast
- Single family starts up 7 pct to 628k, highest since Feb
- Multifamily DOWN 11.1 pct
- Single Fam Permits +3pct, Highest since May
- Multifam DOWN 15.7
- Market Reaction: Slightly negative bias for bonds persists from overnight activity. This data didn't change that much. Moving on...

Privately-owned housing units authorized by building permits in August were at a seasonally adjusted annual rate of 918,000. This is 3.8 percent (±1.3%) below the revised July rate of 954,000, but is 11.0 percent (±1.8%) above the August 2012 estimate of 827,000. Single-family authorizations in August were at a rate of 627,000; this is 3.0 percent (±0.9%) above the revised July figure of 609,000. Authorizations of units in buildings with five units or more were at a rate of 268,000 in August.

Privately-owned housing starts in August were at a seasonally adjusted annual rate of 891,000. This is 0.9 percent (±13.0%)* above the revised July estimate of 883,000 and is 19.0 percent (±11.1%) above the August 2012 rate of 749,000. Single-family housing starts in August were at a rate of 628,000; this is 7.0 percent (±13.9%)* above the revised July figure of 587,000. The August rate for units in buildings with five units or more was 252,000.

Privately-owned housing completions in August were at a seasonally adjusted annual rate of 769,000. This is 0.3 percent